<PAGE>
As filed with the Securities and Exchange Commission on May 25, 1999
Registration 333-78813
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DRUGSTORE.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 5912 04-3416255
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation
or organization)
</TABLE>
13920 Southeast Eastgate Way, Suite 300
Bellevue, Washington 98005
(425) 372-3200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Peter M. Neupert
President and Chief Executive Officer
drugstore.com, inc.
13920 Southeast Eastgate Way, Suite 300
Bellevue, Washington 98005
(425) 372-3200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Joshua L. Green Neil J. Wolff
John H. Sellers Yoichiro Taku
Adam J. Rosenberg Shelly Dolev
Kevin G. Montler WILSON SONSINI GOODRICH & ROSATI
VENTURE LAW GROUP Professional Corporation
A Professional Corporation 650 Page Mill Road
2800 Sand Hill Road Palo Alto, California
Menlo Park, CA 94025 (650) 493-9300
(650) 854-4488
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
----------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by drugstore.com in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee........................................... $ 18,765
NASD filing fee................................................ 6,250
Nasdaq National Market listing fee............................. 1,000
Printing and engraving expenses................................ 300,000
Legal fees and expenses........................................ 350,000
Accounting fees and expenses................................... 200,000
Blue Sky qualification fees and expenses....................... 5,000
Transfer Agent and Registrar fees.............................. 15,000
Miscellaneous fees and expenses................................ 20,000
--------
Total...................................................... $915,015
========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article XIII
of drugstore.com's certificate of incorporation and sections 6.1 and 6.2 of
Article VI of drugstore.com's bylaws provide for indemnification of its
directors, officers, employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. In addition, drugstore.com
has entered into indemnification agreements with its directors and officers.
The indemnification agreements may require drugstore.com, among other things,
to indemnify its directors against certain liabilities that may arise by
reason of their status or service as directors (other than liabilities arising
from willful misconduct of culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' insurance if available on reasonable
terms. The underwriting agreement (Exhibit 1.1 hereto) also provides for cross
indemnification among drugstore.com and the underwriters with respect to
certain matters, including matters arising under the 1933 Act.
Item 15. Recent Sales of Unregistered Securities
(a) Since inception in April 1998, drugstore.com has issued and sold
(without payment of any selling commission to any person) the following
unregistered securities:
(1) In June, July and August, 1998, drugstore.com issued and sold
2,265,000 shares of common stock to a total of 5 investors for an aggregate
purchase price of $90,600.
(2) In June 1998 and August 1998, drugstore.com issued and sold shares
of Series A preferred stock convertible into an aggregate of 10,000,000
shares of common stock to a total of 5 investors for an aggregate purchase
price of $8,000,000.
(3) In October, November and December 1998, drugstore.com issued and
sold shares of Series B preferred stock convertible into an aggregate of
5,446,268 shares of common stock to a total of 6 investors for an aggregate
purchase price of $18,244,997.80.
II-1
<PAGE>
(4) In January 1999, drugstore.com issued and sold shares of Series C
preferred stock convertible into an aggregate of 1,457,891 shares of common
stock to a total of 5 investors for an aggregate purchase price of
$11,407,997.07.
(5) In January 1999, drugstore.com issued and sold two convertible
promissory notes convertible into shares of Series C preferred stock and
further convertible into an aggregate of 3,014,953 shares of common stock
to a total of 2 investors for an aggregate purchase price of
$23,592,007.22. These notes were converted into shares of Series C
preferred stock in March 1999.
(6) In February 1999, drugstore.com issued a warrant to purchase 10,000
shares of common stock in connection with a corporate partnership
agreement.
(7) In May 1999, drugstore.com issued and sold a convertible promissory
note convertible into shares of Series D preferred stock and further
convertible into 2,266,289 shares of common stock to one investor for an
aggregate purchase price of $40,000,000.85.
(8) As of May 19, 1999, 8,000 shares of fully vested common stock had
been issued pursuant to restricted stock purchase agreements and no shares
of common stock had been issued upon exercise of options; 3,068,684 shares
of common stock were issuable upon exercise of outstanding options under
drugstore.com's 1998 stock plan.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Items 15(a)(1)-(7) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
transactions by an issuer not involving any public offering. The issuances
described in Item 15(a)(8) were deemed to be exempt from registration under
the Securities Act in reliance upon Rule 701 promulgated thereunder in that
they were offered and sold either pursuant to written compensatory benefit
plans or pursuant to a written contract relating to compensation, as provided
by Rule 701. In addition, such issuances were deemed to be exempt from
registration under Section 4(2) of the Securities Act as transactions by an
issuer not involving any public offering. The recipients of securities in each
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends where affixed to the securities
issued in such transactions. All recipients had adequate access, through their
relationships with us, to information about drugstore.com.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Fifth Amended and Restated Certificate of Incorporation of
drugstore.com.
3.2* Form of Amended and Restated Certificate of Incorporation of
drugstore.com, to be filed and effective upon completion of this
offering.
3.3* Bylaws of drugstore.com, as amended.
4.1** Form of drugstore.com's common stock certificate.
5.1** Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement between drugstore.com and each of its
officers and directors.
10.2* 1998 Stock Plan, as amended.
10.3* 1999 Employee Stock Purchase Plan.
10.4* Restricted Stock Purchase Agreement with Jed A. Smith dated June 19,
1998.
10.5* Restricted Stock Purchase Agreement with Peter M. Neupert dated July
23, 1998.
10.6* Form of Warrant To Purchase Common Stock.
10.7* Series A Preferred Stock Purchase Agreement dated June 22, 1998.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.8* Series B Preferred Stock Purchase Agreement dated October 9, 1998.
10.9* Series B Preferred Stock Rescission Agreement dated November 23, 1998
between drugstore.com and entities affiliated with Kleiner Perkins
Caufield & Byers.
10.10* Series C Preferred Stock and Convertible Note Purchase Agreement dated
January 29, 1999.
10.11* Series D Preferred Stock and Convertible Note Purchase Agreement dated
May 19, 1999.
10.12* Fourth Amended and Restated Investors' Rights Agreement dated May 19,
1999.
10.13* Sublease Agreement dated January 29, 1999 between drugstore.com and The
Boeing Company for offices at 13920 Southeast Eastgate Way, Suite 300,
Bellevue, Washington.
10.14+ Amended and Restated Technology License and Advertising Agreement dated
May 19, 1999 between drugstore.com, Amazon.com and Amazon.com
Drugstore, Inc.
10.15+ Pharmacy Service Agreement dated February 8, 1999 with RxAmerica L.L.C.
10.16+ Service & Supply Agreement dated January 29, 1999 with Walsh
Distribution, Inc.
10.17* Offer Letter dated June 29, 1998 with Peter M. Neupert.
10.18* Offer Letter dated July 28, 1998 with Kal Raman.
10.19* Offer Letter dated December 4, 1998 with Mark L. Silverman.
10.20* Offer Letter dated June 18, 1998 with Jed A. Smith.
10.21* Amended and Restated Voting Agreement dated May 19, 1999.
10.22* Letter Agreement dated May 19, 1999 with Amazon.com.
10.23* Cable Advertising Agreement dated May 19, 1999 with Vulcan Ventures
Incorporated.
21.1* Subsidiaries.
23.1* Consent of Ernst & Young LLP, Independent Auditors.
23.2** Consent of Counsel (see Exhibit 5.1).
24.1* Power of Attorney (see page II-5).
27.1* Financial Data Schedule (EDGAR-filed version only).
</TABLE>
- --------
*Previously filed.
**To be supplied by amendment.
+ Confidential treatment has been requested as to certain portions of this
Exhibit. Such confidential portions have been provided separately to the
Securities and Exchange Commission.
(b) Financial Statement Schedules
All financial statement schedules not listed are omitted because they are
inapplicable or the requested information is shown in the financial statements
of the registrant or the related notes to the financial statements.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Act) may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit
II-3
<PAGE>
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
posteffective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on May 25, 1999.
drugstore.com, inc.
/s/ David E. Rostov
By: _________________________________
David E. Rostov
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*Peter M. Neupert President, Chief Executive May 25, 1999
______________________________________ Officer and Director
(Peter M. Neupert) (Principal Executive
Officer)
/s/ David E. Rostov Vice President and Chief May 25, 1999
______________________________________ Financial Officer
(David E. Rostov) (Principal Financial and
Accounting Officer)
*Jeffrey P. Bezos Director May 25, 1999
______________________________________
(Jeffrey P. Bezos)
*Brook H. Byers Director May 25, 1999
______________________________________
(Brook H. Byers)
*L. John Doerr Director May 25, 1999
______________________________________
(L. John Doerr)
*Howard Schultz Director May 25, 1999
______________________________________
(Howard Schultz)
*Jed A. Smith Director May 25, 1999
______________________________________
(Jed A. Smith)
</TABLE>
/s/ David E. Rostov
*By: /s/ David E. Rostov
_______________________
David E. Rostov
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Fifth Amended and Restated Certificate of Incorporation of
drugstore.com.
3.2* Form of Amended and Restated Certificate of Incorporation of
drugstore.com, to be filed and effective upon completion of this
offering.
3.3* Bylaws of drugstore.com, as amended.
4.1** Form of drugstore.com's common stock certificate.
5.1** Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement between drugstore.com and each of its
officers and directors.
10.2* 1998 Stock Plan, as amended.
10.3* 1999 Employee Stock Purchase Plan.
10.4* Restricted Stock Purchase Agreement with Jed A. Smith dated June 19,
1998.
10.5* Restricted Stock Purchase Agreement with Peter M. Neupert dated July
23, 1998.
10.6* Form of Warrant To Purchase Common Stock.
10.7* Series A Preferred Stock Purchase Agreement dated June 22, 1998.
10.8* Series B Preferred Stock Purchase Agreement dated October 9, 1998.
10.9* Series B Preferred Stock Rescission Agreement dated November 23, 1998
between drugstore.com and entities affiliated with Kleiner Perkins
Caufield & Byers.
10.10* Series C Preferred Stock and Convertible Note Purchase Agreement dated
January 29, 1999.
10.11* Series D Preferred Stock and Convertible Note Purchase Agreement dated
May 19, 1999.
10.12* Fourth Amended and Restated Investors' Rights Agreement dated May 19,
1999.
10.13* Sublease Agreement dated January 29, 1999 between drugstore.com and The
Boeing Company for offices at 13920 Southeast Eastgate Way, Suite 300,
Bellevue, Washington.
10.14+ Amended and Restated Technology License and Advertising Agreement dated
May 19, 1999 between drugstore.com and Amazon.com.
10.15+ Pharmacy Service Agreement dated February 8, 1999 with RxAmerica L.L.C.
10.16+ Service & Supply Agreement dated January 29, 1999 with Walsh
Distribution, Inc.
10.17* Offer Letter dated June 29, 1998 with Peter M. Neupert.
10.18* Offer Letter dated July 28, 1998 with Kal Raman.
10.19* Offer Letter dated December 4, 1998 with Mark L. Silverman.
10.20* Offer Letter dated June 18, 1998 with Jed A. Smith.
10.21* Second Amended and Restated Voting Agreement dated May 19, 1999.
10.22* Letter Agreement dated May 19, 1999 with Amazon.com.
10.23* Cable Advertising Agreement dated May 19, 1999 with Vulcan Ventures
Incorporated.
21.1* Subsidiaries.
23.1* Consent of Ernst & Young LLP, Independent Auditors.
23.2** Consent of Counsel (see Exhibit 5.1).
24.1* Power of Attorney (see page II-5).
27.1* Financial Data Schedule (EDGAR-filed version only).
</TABLE>
- --------
*Previously filed.
**To be supplied by amendment.
+ Confidential treatment has been requested as to certain portions of this
Exhibit. Such confidential portions have been provided separately to the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 10.14
CONFIDENTIAL TREATMENT REQUESTED
AMENDED AND RESTATED
TECHNOLOGY LICENSE AND ADVERTISING AGREEMENT
This Agreement amends and restates in its entirety the Technology License
and Marketing Agreement dated as of August 10, 1998, and entered into by and
among: Amazon.com, Inc., a Delaware corporation ("Amazon.com"), Amazon.com D,
Inc., a Delaware corporation ("Amazon.com D"), and drugstore.com, inc., a
Delaware corporation ("Company"), all effective as of August 10, 1998.
Amazon.com and Company are sometimes referred to herein collectively as the
"Principal Parties" and each individually as a "Principal Party." The Principal
Parties and Amazon.com D are sometimes referred to herein collectively as the
"Parties" and individually as a "Party." The Parties agree as follows:
Section 1. Definitions
Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:
"Affiliate" means, with respect to a Party, any Person that, directly or
indirectly, Controls, or is Controlled by, or is under common Control with, such
Party.
"Amazon.com Competitor" means any Third Party engaged, directly or
indirectly, in the development, marketing or sale of products or services that
compete with any products or services then produced or marketed by Amazon.com or
which Amazon.com is then preparing to produce or market.
"Amazon.com IPR" means any and all IPR owned or licensable by Amazon.com D
or Amazon.com during the Support Period.
"Amazon.com License" means the license granted by Company to Amazon.com D
and its Affiliates under Section 5.1.
"Amazon.com Licensed Field of Use" means (a) the online promotion and sale
of goods or services, and/or (b) the online provision of related information;
but does not include the online promotion or sale of prescription drugs or the
operation of a Drugstore Business.
"Amazon.com Made Derivative" means any Derivative of the Company Technology
made by Amazon.com or its Affiliates in the exercise of the Amazon.com License.
"Amazon.com Technology" means all of the following which Amazon.com D has
the right, or which Amazon.com would have the right, to license to Company
without Amazon.com D or Amazon.com violating any contractual obligation owing
to, or any IPR of, any Third Party: (a) all software (in both source and object
code forms) and other technology used by Amazon.com in the operation of its
business, including order processing, procurement, payment, accounting and
distribution, but only if and to the extent owned or
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
PAGE 1
<PAGE>
licensable (without cost to Amazon.com or Amazon.com D) by Amazon.com during the
Support Period; and (b) all Amazon.com IPR embodied in such software and other
technology; provided, however, that the Amazon.com Technology shall not include,
without limitation, any database, customer data or information or other business
information.
"Company Competitor" means any Third Party that is, or is actively
attempting to become, principally and primarily known for engaging in a
Drugstore Business and whose principal and primary business is a Drugstore
Business.
"Company IPR" means any and all IPR owned or licensable by Company during
the Support Period.
"Company License" means the license granted by Amazon.com D to Company
under Section 4.1.
"Company Licensed Field of Use" means (a) the online retail sales of
prescription drugs, over-the-counter drugs, vitamin and fitness supplements,
natural remedies, body care products and durable medical goods, (b) the online
retail sales of other goods and services to the extent they are typically
marketed and sold as part of the operation of a Drugstore Business, and (c) the
online provision of information relating to the goods and services described in
(a) and (b), above; provided that, in each case, the goods, services and
information are provided directly under the Company's brand or a similar brand
that is primarily known and marketed as the brand of a Drugstore Business; and
provided further that the Company Licensed Field of Use does not include,
without limitation, the promotion or sale (or supporting or facilitating the
promotion or sale) of books, video or music products, or the provision or
operation of any gift center (e.g., a web site or other online service (or
portion thereof designed to facilitate the giving of gifts) except for low
volume sales that are merely incidental to the promotion and sale of the goods
and services described in (a) and (b), above, and which, in the aggregate, do
not generate gross revenues for any calendar quarter that exceed three percent
(3%) of the total gross revenues of Company and its Affiliates from all online
sales of products and services for that quarter (excluding revenues from the
sale of such products and services through separately negotiated Amazon.com
affiliate arrangements).
"Company Made Derivative" means any Derivative of the Amazon.com Technology
made by Company in its exercise of the Company License.
"Company Site" means the Company site on the World Wide Web to be developed
by Company and located at www.drugstore.com (and any successor, mirror or
Affiliate sites), and through which Company will engage in an online Drugstore
Business.
"Company Technology" means all of the following which Company has the right
to license to Amazon.com D and its Affiliates under the Amazon.com License
without violating any contractual obligation owing to, or any IPR of, any Third
Party: (a) all software (in both source and object code forms) and other
technology used by Company in the operation of its
PAGE 2
<PAGE>
business, including order processing, procurement, payment, accounting and
distribution, but only if and to the extent owned or licensable (without cost to
Company) by Company during the Support Period; and (b) all Company IPR embodied
in such software and other technology; provided, however, that the Company
Technology shall not include, without limitation, any database, customer data or
information or other business information.
"Competitive Amazon.com Acquisition" means Amazon.com becoming Controlled
by, or its assignee or successor to the Amazon.com License becoming Controlled
by, any Company Competitor.
"Competitive Company Acquisition" means Company becoming Controlled by, or
its assignee or successor to the Company License becoming Controlled by, any
Amazon.com Competitor.
"Confidential Information" means the existence and terms of this Agreement
and all trade secrets, know-how and nonpublic information which relates to
research, development, trade secrets, know-how, inventions, source codes,
technical data, software programming, concepts, designs, procedures,
manufacturing, purchasing, accounting, engineering, marketing, merchandising,
selling, business plans or strategies and other proprietary or confidential
information, protectable under the laws of the United States or any other
jurisdiction or country.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether by contract or through the ownership of voting securities, including,
without limitation, the ownership of more than fifty percent (50%) of the
equity, partnership or similar interest in such Person.
"Derivative" means (a) any enhancement, improvement, modification,
translation, abridgment, expansion, compilation or "derivative work" (as defined
in the U.S. Copyright Act, as amended from time to time), (b) any improvement
that falls within the claim of any patent, or (c) any work that embodies,
incorporates or uses any Confidential Information or for which any Confidential
Information was used in the development of such work.
"Development Period" means the period commencing on the date of this
Agreement and ending on the earlier of (a) thirty (30) days after the Launch
Date and (b) June I , 1999.
"Drugstore Business" means a business (a) principally known and marketed as
a drugstore (as that term is commonly used and understood) and (b) principally
engaged in the retail marketing, offering, sale and distribution of prescription
drugs and over-the-counter drugs. A Drugstore Business may also engage in the
retail offering, sale and distribution of vitamins and fitness supplements,
natural health remedies, body care products, durable medical goods, and products
and services typically marketed and sold as part of the operation of a
drugstore. Examples of Drugstore Businesses as of the date of this Agreement
are Payless, Rite-Aid and CVS, as they exist on the date of this Agreement.
PAGE 3
<PAGE>
"IPR" means any copyright, patent, trade secret, moral right or other
intellectual property or proprietary right of any kind, whether arising under
the laws of the United States or any other nation, state or jurisdiction
(including, but not limited to, any foreign equivalents thereto). IPR does not
include any Trademarks.
"Launch Date" means the date on which Company begins commercial operation
of the initial Company Site.
"Launch Period" means the period commencing on the Launch Date and ending
ninety (90) days after the Launch Date.
"Minor Amazon.com Competitor" means any Amazon.com Competitor with respect
to which (a) the products and services of Amazon.com that compete with the
products and services of such Amazon.com Competitor generate and comprise less
than five percent (5%) of Amazon.com's total revenue from the sale of products
and services during the most recently completed fiscal year, or (b) the
competing products and services of the Amazon.com Competitor are merely
incidental to the Amazon.com Competitor's business (for example, an insurance
company's sale of shirts branded with its logo would be incidental to its
business as a provider of insurance).
"Minor Company Competitor" means any Company Competitor with respect to
which the products and services of Company that compete with the products and
services of such Company Competitor generate and comprise less than five percent
(5%) of Company's total revenue from the sale of products and services during
the most-recently completed fiscal year.
"Person" means any individual, corporation, partnership, limited liability
company, trust, association or other entity or organization, including any
governmental or political subdivision or any agency or instrumentality thereof.
"Support Period" means the period commencing on the date of this Agreement
and ending on the tenth anniversary of the date of this Agreement.
"Third Party" means any Person that is not a Party or an Affiliate of a
Party.
"Trademarks" means all common law or registered trademark, service mark,
trade name and trade dress rights and similar or related rights arising under
any of the laws of the United States or any other country or jurisdiction,
whether now existing or hereafter adopted or acquired.
Section 2. Company Site Development
2.1 Project Manager
Following execution of this Agreement, Amazon.com will appoint and maintain
in place throughout the Development Period a technical project manager to
coordinate its efforts
PAGE 4
<PAGE>
under this Agreement relating to the development of the Company Site. Amazon.com
may change its appointed technical project manager from time to time upon notice
to Company.
2.2 Project Assessment
During the Development Period, the parties will perform a project
assessment, in such manner and at such times as the Parties mutually agree upon
in writing, to determine the mix of Amazon.com Technology and Third Party
technology to be incorporated into the Company Site.
2.3 Technical Consulting
During the Development Period, Amazon.com will provide to Company up to an
average of twenty (20) hours per week of technical consulting (as established by
the Parties based on their reasonable determination as to the required level of
support), in such manner and at such times as the Parties mutually agree upon in
writing, to assist Company in the development of the Company Site.
2.4 Executive Search
Following the execution of this Agreement, Amazon.com will provide to
Company reasonable assistance in identifying an individual to serve as the
initial chief technology officer of Company, in such manner and at such times as
the Parties mutually agree upon in writing.
Section 3. Company Site Launch
3.1 Project Manager
Following execution of this Agreement, Amazon.com will appoint and maintain
in place throughout the Launch Period a project manager to coordinate its
efforts under this Agreement relating to advertising on the Company Site.
Amazon.com may change its project manager from time to time upon notice to
Company.
3.2 Marketing Consulting
During the Launch Period, Amazon.com will provide to Company up to an
average of twenty (20) hours per week of marketing consulting (as established by
the Parties based on their reasonable determination as to the required level of
support), in such manner and at such times as the Parties mutually agree upon in
writing, to assist Company in the planning for the launch of the Company Site.
3.3 Advertising Placements
During the Launch Period, Amazon.com will provide to Company the
advertising placements identified in the attached Exhibit A.
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Section 4. Company License
4.1 Grant
4.1.1 Subject to the terms and conditions set forth in this
Agreement, Amazon.com D hereby grants to Company and its Affiliates (other than
an Affiliate who is also an Amazon.com Competitor) a limited, nontransferable
(except as permitted under Section 11.2), fully paid, royalty-free, nonexclusive
worldwide license, under the Amazon.com IPR, to do the following: (a) make, copy
and use the Amazon.com Technology in the conduct of Company's or its Affiliates'
business within the Company Licensed Field of Use; and (b) develop and make
Derivatives from and of the Amazon.com Technology and use such Company Made
Derivatives in the conduct of Company's or its Affiliates' business within the
Company Licensed Field of Use.
4.1.2 Prior to the execution of this Agreement, Amazon.com has
furnished to Company a copy of the fully executed license agreement between
Amazon.com and Amazon.com D under which Amazon.com has granted to Amazon.com D
such rights of Amazon.com in and to the Amazon.com Technology and Amazon.com IPR
as are necessary, required and appropriate for Amazon.com D to grant Company the
Company License under Section 4.1.1. Thereafter, Amazon.com shall execute and
deliver to Amazon.com D (with a copy to Company) such further documents as may
be required to ensure that the foregoing rights are held by Amazon.com D as and
to the extent contemplated in this Agreement. If the Company License is (other
than on account of any termination of the Company License in accordance with the
provisions of this Agreement) found to be invalid, Amazon.com hereby grants to
Company a license to the Amazon.com Technology and Amazon.com IPR on the same
terms and conditions as the Company License. Amazon.com hereby guarantees all
present and future obligations of Amazon.com D under this Agreement.
4.2 Reservation of Rights
Amazon.com D and Amazon.com reserve ownership of the Amazon.com Technology.
Except for the Company License, no right, title or interest in, to or under any
of the Amazon.com Technology is granted, created, assigned or otherwise
transferred to Company pursuant to or by virtue of this Agreement. Without
limiting the generality of the foregoing, Company shall not without Amazon.com
D's prior written consent, given or withheld in Amazon.com D's sole discretion:
(a) sublicense to any Third Party the right to use or make Derivatives of the
Amazon.com Technology, except for contractors of Company who have a need for
such rights in order to provide work-for-hire services to Company and who agree
in writing to be bound by all restrictions, limitations and requirements of this
Agreement relating to the use of or other dealings with the Amazon.com
Technology; or (b) use all or any portion of the Amazon.com Technology or any
Company Made Derivative outside of the Company Licensed Field of Use.
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4.3 Third-Party Rights
Company acknowledges that the Company License is subject to any and all
applicable rights of Third Parties in and to the Amazon.com Technology. The
Amazon.com Technology is licensed to Company under the Company License only to
the extent that Amazon.com is legally and contractually entitled to license the
same, through Amazon.com D, to Company. Company shall comply with all Third
Party restrictions and limitations on use of the Amazon.com Technology that are
made known to Company.
4.4 Compliance With Laws
In exercising the Company License, Company shall comply with all applicable
laws, rules, regulations, orders and other requirements of any governmental
authority having jurisdiction. Without limiting the generality of the
foregoing, Company shall comply with all such requirements relating to the
import, export or re-export of any Amazon.com Technology or other items subject
to this Agreement (including, but not limited to, requirements under the U.S.
Export Administration Act, regulations of the Department of Commerce or its
successors, executive orders and other export controls of the United States of
America). Company shall not import, export or re-export, or authorize the
import, export or re-export of, any such items in violation of any such
requirement.
4.5 Advertising Restrictions
4.5.1 At all times during the Support Period, Company will not place
(or permit any Amazon.com Competitor to place) any Amazon.com Competitor's
advertising banners, promotional buttons, promotional links or other promotional
materials or content on any Company Site.
4.5.2 The restrictions contained in Section 4.5.1 will not apply to
advertising banners, promotional buttons, promotional links or other promotional
materials or content of any Minor Amazon.com Competitor, unless Amazon.com
notifies Company in writing that Amazon.com (or any of its Affiliates) has a
good faith intent to derive significant revenues from the sale of products or
services that compete with those of the Minor Amazon.com Competitor. For
example, although Amazon.com's revenues from music CDs accounted for less than
five percent (5%) of its total revenue during its most-recently completed fiscal
year, the advertising restrictions would apply to vendors of music products.
4.5.3 Amazon.com hereby notifies Company of its good faith intent to
derive significant revenues from the sale of video products, music products, and
from the operation of a gift center. Amazon.com may deliver additional notices
from time to time pursuant to Section 11.3.
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Section 5. Amazon.com License
5.1 Grant
Subject to the terms and conditions set forth in this Agreement, Company
hereby grants to Amazon.com D and its Affiliates a limited, nontransferable
(except as permitted under Section 11.2), fully paid, royalty-free, worldwide,
nonexclusive license, under the Company IPR, to do the following: (a) make, copy
and use the Company Technology in the conduct of Amazon.com D's or the
Affiliate's business within the Amazon.com Licensed Field of Use; and (b)
develop and make Derivatives from and of the Company Technology and use such
Amazon.com Made Derivatives in the conduct of Amazon.com D's or the Affiliate's
business within the Amazon.com Licensed Field of Use.
5.2 Reservation of Rights
Company reserves ownership of the Company Technology. Except for the
Amazon.com License, no right, title or interest in, to or under any of the
Company Technology is granted, created, assigned or otherwise transferred to
Amazon.com D pursuant to or by virtue of this Agreement. Without limiting the
generality of the foregoing, Amazon.com D shall not without Company's prior
written consent, given or withheld in Company's sole discretion: (a) sublicense
to any Third Party the right to use or make Derivatives of the Company
Technology, except for contractors of Amazon.com D and Amazon.com who have a
need for such rights in order to provide work-for-hire services to Amazon.com D
and Amazon.com and who agree in writing to be bound by all restrictions,
limitations and requirements of this Agreement relating to the use of or other
dealings with the Company Technology; or (b) use all or any portion of the
Company Technology or any Amazon.com Made Derivative outside of the Amazon.com
Licensed Field of Use.
5.3 Third-Party Rights
Amazon.com D acknowledges that the Amazon.com License is subject to any and
all applicable rights of Third Parties in the Company Technology. The Company
Technology is licensed to Amazon.com D under the Amazon.com License only to the
extent that Company is legally and contractually entitled to license the same to
Amazon.com D. Amazon.com D and Amazon.com shall comply with all Third Party
restrictions and limitations on use of the Company Technology that are made
known to Amazon.com D and Amazon.com.
5.4 Compliance With Laws
In exercising the Amazon.com License, Amazon.com D and Amazon.com shall
comply with all applicable laws, rules, regulations, orders and other
requirements of any governmental authority having jurisdiction. Without
limiting the generality of the foregoing, Amazon.com D and Amazon.com shall
comply with all such requirements relating to the import, export or re-export of
any Company Technology or other items subject to this Agreement (including, but
not limited to, requirements under the U.S. Export Administration
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Act, regulations of the Department of Commerce or its successors, executive
orders and other export controls of the United States of America). Amazon.com D
and Amazon.com shall not import, export or re-export, or authorize the import,
export or re-export of, any such items in violation of any such requirement.
Section 6. Technical and Advertising Support
6.1 Advertising
Subject to the terms and conditions of this Agreement, during the Support
Period the Principal Parties will undertake the following efforts:
(a) The Principal Parties will each appoint a liaison to
oversee and address issues regarding the Parties' ongoing advertising
activities. A Principal Party may change its advertising liaison by giving
written notice to the other Principal Party.
(b) The Principal Parties will appoint one (1) senior marketing
representative of each Principal Party, which will meet on at least a
calendar quarterly basis to discuss opportunities and establish advertising
goals of the Principal Parties for the next calendar quarter.
(c) Each Principal Party will provide the other Principal Party with
sustained and substantial ongoing advertising placements on its site on the
World Wide Web, in form, content and location as mutually agreed upon by
the Principal Parties from time to time taking into consideration, among
other things, the Principal Parties' agreed upon marketing goals; provided
that the foregoing neither requires nor precludes an equal level of effort
by the Principal Parties.
(d) The Principal Parties may engage in periodic competitive market
research activities as mutually agreed upon by the Principal Parties from
time to time.
6.2 Joint Technology Support
Subject to the terms and conditions of this Agreement, during the Support
Period the Parties will provide the following joint technology support:
(a) The Parties will each appoint a technical liaison to oversee and
address issues regarding the Parties' ongoing sharing of their respective
technologies. The technical liaison for Amazon.com and Amazon.com D may be
the same individual. A Party may change its technical liaison by giving
written notice to the other Parties.
(b) As requested by Company following completion of the project
assessment under Section 2.2, Amazon.com D will provide to Company copies
of the
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Amazon.com Technology in such manner as mutually agreed upon by the Parties
for use by Company under the terms of the Company License.
(c) Promptly after the Company Technology (or any portion thereof)
becomes available, Company will provide to Amazon.com D copies of the
Company Technology in such manner as mutually agreed upon by the Parties
for use by Amazon.com D and its Affiliates under the terms of the
Amazon.com License.
(d) Amazon.com will provide to Amazon.com D, and Amazon.com D will
provide to Company, updated copies of the Amazon.com Technology on a
periodic basis, in such manner and at such times as mutually agreed upon by
the Parties, for use by Company under the terms of the Company License.
(e) Company will provide to Amazon.com D updated copies of the Company
Technology on a periodic basis, in such manner and at such times as
mutually agreed upon by the Parties, for use by Amazon.com D and its
Affiliates under the terms of the Amazon.com License.
6.3 Oversight
Each Party will appoint a senior executive officer to oversee and have
overall responsibility for the administration of this Agreement and the Parties'
business relationship contemplated by this Agreement. Such senior executive
officers will meet, either in person or by telephone conference at least once
each calendar quarter. A Party may change its senior executive officer
appointed for this purpose by giving written notice to the other Party.
Section 7. Warranty; Disclaimer; Infringement Claims
7.1 Mutual Representations and Warranties.
Each Party represents and warrants to the other that: (a) it has full power
and legal right to execute and deliver this Agreement and to perform its
obligations under this Agreement; (b) the execution, delivery and performance of
this Agreement have been authorized by all required action, corporate or
otherwise, and do not violate or conflict with any provisions of its charter or
bylaws or any of its contractual obligations or requirements of law binding on
it; (c) this Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms; and (d) it has and shall
maintain in full force and effect throughout the term of this Agreement, all
governmental permits, licenses and authorizations required on its part to
perform its obligations under this Agreement. Further, Amazon.com warrants to
Company that, as of the date of this Agreement, Amazon.com D is duly
incorporated and has full power and legal right to execute and deliver this
Agreement and to perform its obligations under this Agreement.
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7.2 Disclaimers
The Amazon.com Technology is licensed by Amazon.com D and accepted by
Company, and the Company Technology is licensed by Company and accepted by
Amazon.com, "AS IS" and "WITH ALL FAULTS, DEFECTS AND ERRORS". NO PARTY WILL
HAVE ANY LIABILITY FOR ANY ERROR, OMISSION OR DEFECT IN THE IPR OR WORKS
LICENSED BY THAT PARTY TO THE OTHER UNDER THIS AGREEMENT; AND NO PARTY MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, REGARDING SUCH LICENSED IPR OR WORKS (INCLUDING
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE).
FURTHER, EACH PARTY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH
REGARD TO: (A) THE SCOPE, COVERAGE, VALIDITY OR ENFORCEABILITY OF ANY IPR
LICENSED BY SUCH PARTY UNDER THIS AGREEMENT; OR (B) ANY WARRANTY REGARDING NON-
INFRINGEMENT OF ANY IPR OF ANY THIRD PARTY OR ANY WARRANTY RELATING TO
PERFORMANCE, FUNCTIONALITY, QUALITY OR ANY OTHER CHARACTERISTICS).
7.3 Limitation on Liability
Except to the extent arising out of a Party's infringement or violation of
any other Party's patents, copyrights or trade secrets, no Party shall be liable
to any other Party or such other Party's Affiliates, whether arising out of
contract, tort (including negligence), strict liability or otherwise, for any
indirect, incidental, special or consequential damages, including loss of
revenue, cost of capital or loss of business reputation or opportunity, arising
out of or relating to this Agreement or any IPR or technology licensed
hereunder, even if such Party has been advised of the possibility of such
damages.
7.4 Notice
If a Party learns of any infringement of any IPR of any other Party or
learns of a Third Party claim alleging that such Party's use of the IPR of the
other Party infringes the IPR of such Third Party, such Party will promptly
notify such other Party thereof.
7.5 Legal Action for Infringement of IPR
7.5.1 Amazon.com reserves any and all rights to commence, prosecute,
compromise and settle any claim, action or proceeding for infringement, unfair
competition, unauthorized use, misappropriation or violation of any of the
Amazon.com IPR by any Third Party. Amazon.com may commence, prosecute,
compromise or settle any such claim, action or proceeding, as well as any claim,
action or proceeding to defend any of the Amazon.com Technology, in its sole
discretion, but shall not have any obligation to do so. Amazon.com will keep
Company apprised of the status of any such claim, action or proceeding and
notify Company if Amazon.com elects to discontinue further prosecution or
defense of the same.
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7.5.2 Company reserves any and all rights to commence, prosecute,
compromise and settle any claim, action or proceeding for infringement, unfair
competition, unauthorized use, misappropriation or violation of any of the
Company IPR by any Third Party. Company may commence, prosecute, compromise or
settle any such claim, action or proceeding, as well as any claim, action or
proceeding to defend any of the Company Technology, in its sole discretion, but
shall not have any obligation to do so. Company will keep Amazon.com apprised
of the status of any such claim, action or proceeding and notify Amazon.com if
Company elects to discontinue further prosecution or defense of the same.
7.5.3 No Party shall have the right to commence or prosecute any
legal action with regard to the IPR of any other Party, without such other
Party's prior written consent in such other Party's sole discretion.
7.5.4 If a Party becomes the subject of a claim, action or proceeding
for infringement, unfair competition, unauthorized use, misappropriation or
violation of any IPR of a Third Party as a result of its use of any other
Party's IPR pursuant to this Agreement, then the Party owning such IPR shall
upon the request of such other Party defend the requesting Party from and
against such claim, action or proceeding; provided that the requesting Party
shall provide such assistance in defense of the claim, action or proceeding as
the owning Party may request and shall comply with any settlement or court order
made in connection with the claim, action or proceeding (e.g., relating to the
future use of any infringing IPR); and provided further that, notwithstanding
the foregoing, the requesting Party shall indemnify the owning Party from and
shall pay any and all damages, liabilities, costs and expenses (including
reasonable attorneys fees) incurred by the owning Party or otherwise arising out
of such claim, action or proceeding to extent related to the requesting Party's
use of the owning Party's IPR. In any case, the requesting Party shall be
entitled to participate in the defense of any such claim, action or proceeding,
at its own cost, with counsel of its choice.
Section 8. Additional Obligations of the Parties
8.1 Nondisclosure
8.1.1 A Party (the "Receiving Party") receiving any Confidential
Information of the other Party (the "Disclosing Party") will exercise a
reasonable degree of care, but in no event less than the same degree of care
that it uses to protect its own confidential information of a like nature, to
keep confidential and not disclose such Confidential Information. Without
limiting the generality of the foregoing, the Receiving Party shall disclose the
Confidential Information of the other Party only to those of its employees and
contractors (a) who have a need to know the Confidential Information in order to
exercise its license to such Confidential Information, and (b) who are
contractually obligated to comply with the disclosure and usage restrictions set
forth in this Agreement. In addition, each Party may, with the prior written
consent of the other Party (which consent shall not be unreasonably withheld),
disclose the existence and terms of this Agreement to potential sources of
financing who are contractually obligated to maintain the confidentiality
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of such information; provided, however, that if, after receipt of a written
request for consent, the other Party does not respond to the request within
three (3) business days, consent will be deemed to have been given so long as
the requested disclosure is not to an Amazon.com Competitor or a Company
Competitor, as applicable.
8.1.2 The obligations set forth in Section 8.1.1 above shall not
apply to any Confidential Information to the extent it: (a) is approved by prior
written authorization of the Disclosing Party for release by the Receiving
Party; (b) is disclosed in order to comply with a judicial order issued by a
court of competent jurisdiction, in which event the Receiving Party shall give
prior written notice to the Disclosing Party of such disclosure as soon as
practicable and shall cooperate with the Disclosing Party in using all
reasonable efforts to obtain an appropriate protective order or equivalent,
provided that the information shall continue to be Confidential Information to
the extent it is covered by such protective order or equivalent; (c) becomes
generally available to the public through any means other than a breach by the
Receiving Party of its obligations under this Agreement; (d) was in the
possession of the Receiving Party without obligation of confidentiality prior to
receipt or disclosure under this Agreement as evidenced by written records made
prior to such receipt or disclosure; (e) is developed independently by the
Receiving Party without the use of or benefit from any of the Confidential
Information of the other Party or without breach of this Agreement, as evidenced
by written records of the Receiving Party in existence as of disclosure by the
Disclosing Party; or (f) is required to be disclosed by government rule or
regulation (e.g., in connection with a securities filing), provided that the
Receiving Party gives the Disclosing Party advance written notice of the
disclosure and cooperates with the Disclosing Party in any attempt to limit the
scope of the required disclosure. In any dispute over whether information is
Confidential Information under this Agreement, it will be the burden of the
Receiving Party to show that such contested information falls within the
exceptions set forth in this Section 8.1.2.
8.2 No Contest of Amazon.com IPR
Company shall not contest or otherwise challenge (e.g., in any legal action
or otherwise), or assist or encourage any other Person to contest or challenge,
the validity of any Amazon.com IPR; provided that the foregoing shall not
preclude Company from claiming that the IPR in question is Company IPR.
8.3 No Contest of Company IPR
Amazon.com shall not contest or otherwise challenge (e.g., in any legal
action or otherwise), or assist or encourage any other Person to contest or
challenge, the validity of any Company IPR; provided that the foregoing shall
not preclude Amazon.com from claiming that the IPR in question is Amazon.com
IPR.
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8.4 Accommodation of Patent Application Requirements
If the Party which owns IPR notifies any other Party that it intends to
file patent application(s) with respect to such IPR and thereafter diligently
pursues such patents, such other Party will refrain from using any work related
thereto (or any portion thereof) in a manner which would adversely affect the
availability of such patents.
Section 9. Resolution of Disputes
9.1 General
If any dispute arises between the Parties relating to this Agreement, each
Party will follow the dispute resolution procedures set forth in this Section 9
prior to initiating any litigation or pursuing other available remedies unless
otherwise agreed in writing by the Parties at the time the dispute arises.
Notwithstanding the foregoing, any Party may commence litigation without having
first complied with the provisions of this Section 9 if such commencement occurs
within thirty (30) days prior to the date after which the commencement of
litigation would be barred by any statute of limitations, statute of repose or
other law, rule, regulation, or order of similar import or in order to request
injunctive or other equitable relief necessary to prevent irreparable harm. In
such event, the Parties will (except as may be prohibited by judicial order)
nevertheless continue thereafter to follow the procedures set forth in this
Section 9.
9.2 Initiation of Procedures
If a Party seeks to initiate the procedures under this Section 9, such
Party will give written notice thereof to the other Parties. Such notice will
(a) state that such a notice is a notice initiating the procedures under this
section, (b) describe briefly the nature of the dispute and the initiating
party's claim or position in connection with the dispute, and (c) identify an
individual with authority to settle the dispute on such Party's behalf. Within
ten (10) days after receipt of any notice under this Section 9.2, the receiving
Party will give the initiating Party written notice which describes briefly the
receiving Party's claims and positions in connection with the dispute and
identifies an individual with the authority to settle the dispute on behalf of
the receiving Party.
9.3 Pre-Litigation Discussion
The Parties will cause the individuals identified in their respective
notices under Section 9.2 above to promptly make such investigation of the
dispute as such individuals deem appropriate. Promptly and in no event later
than ten (10) days after the date of the initiating Party's notice under Section
9.2, such individuals will commence discussions concerning resolution of the
dispute. If the dispute has not been resolved within thirty (30) days after
commencement of such discussions, then any Party may request that the other
Parties make their presidents available to discuss resolution of such dispute.
Each Party will cause its president to meet together to discuss such dispute at
a mutually agreed upon time
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within fifteen (15) days after a Party makes such request. If the dispute has
not been resolved within thirty (30) days after the presidents of the Parties
have first met, any Party may submit the dispute to litigation.
Section 10. Termination
10.1 Termination by Company
Company may terminate the Amazon.com License and the Parties' obligations
under Sections 2, 3 and 6 by giving Amazon.com written notice of termination if
(a) Amazon.com at any time materially breaches any of its obligations under this
Agreement and fails to cure such breach in all material respects within sixty
(60) days after Company gives Amazon.com written notice of such breach, or (b) a
Competitive Amazon.com Acquisition occurs.
10.2 Termination by Amazon.com
Amazon.com D and/or Amazon.com may terminate the Company License and the
Parties' obligations under Sections 2, 3 and 6 by giving Company written notice
of termination if: (a) Company at any time materially breaches any of its
obligations under this Agreement and fails to cure such breach within sixty (60)
days after Amazon.com or Amazon.com D gives Company written notice of such
breach; or (b) a Competitive Company Acquisition occurs and Amazon.com has not,
as part of a shareholder vote to approve such Competitive Company Acquisition,
voted its shares of Company's stock then held by Amazon.com in favor of the
Competitive Company Acquisition.
10.3 Effect of Termination of a License
Upon any termination pursuant to this Section 10 of a license granted under
this Agreement, (a) subject to Section 10.4, the licensee Party shall cease all
use of the IPR and technology subject to the terminated license and, at the
terminating Party's option, shall return or destroy all such IPR and technology
within the licensee Party's possession or control, (b) the other license granted
hereunder shall remain in full force and effect until terminated pursuant to
this Section 10, and (c) the Parties' obligations under all other provisions of
this Agreement which are not terminated or which may reasonably be interpreted
or construed as surviving termination (including, without limitation, Sections
1, 7, 8, 9, 10 and 11) will survive such termination. In the event of any
termination, Amazon.com shall not be obligated or required to return or
surrender any capital stock of Company then held by Amazon.com.
10.4 Transition Period
If termination under this Section 10 is (a) pursuant to Section 10.1(a) or
10.2(a) and the material breach in question does not in any way involve the IPR
of the terminating Party or (b) pursuant to Section 10.1(b) or 10.2(b) and the
Competitive Amazon.com Acquisition or Competitive Company Acquisition, as the
case may be, involves only a Minor
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CONFIDENTIAL TREATMENT REQUESTED
Amazon.com Competitor or a Minor Company Competitor, as the case may be, who has
furnished adequate written assurance that it will (and fully intends to)
continue to qualify as a Minor Amazon.com Competitor or Minor Company
Competitor, as the case may be, under this Agreement and that its use of the IPR
and technology will not breach or violate the terms of the terminated license,
then the terminated license shall continue in effect for a period of nine (9)
months from the date of the terminating Party's notice with respect to IPR and
technology then in the licensee Party's possession, all subject to the
restrictions and limitations set forth in this Agreement, and the licensee
Party's obligations under Section 10.3(a) shall apply from and after the
expiration of such nine (9) month period.
10.5 Liquidated Damages
In the event (a) Amazon.com or Amazon.com D materially breaches any of its
obligations under Section 2, 3 or 6, and (b) Company properly terminates the
Amazon.com License and the Parties' obligations under Sections 2, 3 and 6 of
this Agreement on account of such breach pursuant to Section 10.1(a), then
Amazon.com will, upon written notice from Company, pay to Company, as liquidated
damages, the sum of [*]. Such liquidated damages will constitute the minimum
amount payable to Company in connection with such material breach by Amazon.com
or Amazon.com D, as applicable. This Section 10.5 will not in any way limit
Company's right to seek recovery of any and all monetary damages actually
incurred by the Company (subject to Section 9) and to which it is otherwise
entitled under this Agreement as a result of the breach (i.e., in light of all
limitations and other provisions of this Agreement and applicable law). In the
event Company seeks recovery of additional damages, the sum paid or payable
hereunder will be applied to reduce any amounts payable by Amazon.com or
Amazon.com D, as applicable, to the Company as part of any settlement or final,
unappealable judgment entered in such proceeding.
10.6 Limitation of Remedies
Notwithstanding any provision of this Agreement to the contrary, the rights
and obligations of each Party under this Agreement are separate and distinct
from any rights and obligations of each Party under any other agreement among or
between any of the Parties. Under no circumstances will any breach or
termination of this Agreement for any reason require Amazon.com or Amazon.com D
to reconvey, transfer, relinquish or surrender (a) any right, benefit or
entitlement granted by Company to Amazon.com or Amazon.com D under any
separately executed agreement, or (b) any shares of stock or equity interest in
Company held by Amazon.com or Amazon.com D.
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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Section 11. Miscellaneous
11.1 Relationship
The Parties are independent contractors under this Agreement. Each Party
acknowledges and agrees that it is not and will not be during the term of this
Agreement, be an employee or an agent of any other Party. Nothing in this
Agreement will be deemed to constitute, create, give effect to or otherwise
recognize a joint venture, partnership, franchise or business entity of any
kind. Nothing in this Agreement will be construed as providing for the sharing
of profits or losses arising out of the efforts of the Parties hereto.
11.2 Assignment
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, and the legal representatives, successors in interest and
permitted assigns, respectively, of each such Party. This Agreement shall not
be assigned in whole or in part by any Party without the prior written consent
of the other Parties, such consent not to be unreasonably withheld; provided,
however, that a Party may, without consent of the other Parties, assign this
Agreement to an Affiliate of the assignor, or to an entity acquiring
substantially all of the assets or capital stock of the assignor due to merger,
acquisition or consolidation so long as (a) the assignor remains liable for the
full and faithful performance of the assignee hereunder, (b) such Affiliate or
successor in writing assumes all of the obligations of the assignor under this
Agreement and agrees to comply with the terms set forth in this Agreement, and
(c) a copy of the assignment is provided to the non-assigning Parties.
11.3 Notices
All notices, requests, demands, applications, services of process, and
other communications which are required to be or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
by courier or mailed, certified first class mail, postage prepaid, return
receipt requested, to the Parties to this Agreement at the following addresses:
If to Amazon.com: Amazon.com, Inc.
1516 2nd Avenue
Seattle, WA 98101
Attn: General Counsel
Fax: 206-694-2082
If to Amazon.com D: Amazon.com D, Inc.
1516 2nd Avenue
Seattle, WA 98101
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Attn: President
Fax: 206-694-2082
If to Company: drugstore.com, inc
13920 SE Eastgate Way, Suite 300
Bellevue, WA 98005
Attn: General Counsel
Fax: 425-372-3800
or to such other address as the Party shall have furnished to the others by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, on the date of
transmission unless transmitted after normal business hours, in which case on
the following date, (iii) if mailed, upon the date of first attempted delivery.
11.4 Waiver
No provision of this Agreement shall be deemed to be waived and no breach
excused unless such waiver or consent shall be in writing and signed by the
Party which is claimed to have waived or consented. The failure of a Party at
any time, or from time to time, to require performance by the other Parties of
any provision hereof shall in no way affect the rights of such Party thereafter
to enforce the same nor shall the waiver by a Party of any breach of any
provision hereof by the other Parties constitute a waiver of any succeeding
breach of such provision, or a waiver of any provision itself, or a waiver of
any other provisions hereof.
11.5 Severability
This Agreement will be enforced to the fullest extent permitted by
applicable law. If for any reason any provision of this Agreement is held to be
invalid or unenforceable to any extent, then such: (a) provision will be
interpreted, construed or reformed to the extent reasonably required to render
the same valid, enforceable and consistent with the original intent underlying
such provision; (b) provision will be void to the extent it is held to be
invalid or unenforceable; (c) provision will remain in effect to the extent that
it is not invalid or unenforceable; and (d) such invalidity or unenforceability
will not affect any other provision of this Agreement or any other agreement
between the Parties.
11.6 Remedies
Except as otherwise expressly provided in this Agreement, each and all of
the rights and remedies provided in this Agreement, and each and all of the
remedies allowed at law and in equity, will be cumulative, and the exercise of
one right or remedy will not be exclusive of the right to exercise or resort to
any and all other rights or remedies provided in this Agreement or at law or in
equity.
PAGE 18
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11.7 Injunctive Relief
The Parties acknowledge that a breach of Section 8 would cause irreparable
harm, the extent of which would be difficult to ascertain. Accordingly, they
agree that, in addition to any other legal remedies to which the non-breaching
Party may be entitled, such Party shall be entitled to obtain immediate
injunctive relief in the event of a breach of such Section 8.
11.8 Governing Law
This Agreement will be governed by and construed according to the laws of
the State of Washington without regard to its choice of law provisions. The
Parties consent to the jurisdiction of such courts and waive any right to assert
that any such court constitutes an inconvenient or improper forum.
11.9 Publicity
Except for any announcement intended solely for the internal distribution
of a Party, or any disclosure required by legal, accounting, or regulatory
requirements, no Party shall use any other Party's name or refer to it directly
or indirectly in the context of this Agreement in any advertisement, news
release or release to any professional or trade publication or business
presentation without the written approval from such Party for each such use or
release, unless (a) such information was used in a previously approved
advertisement or release and such information remains accurate and (b) the
approval has not been withdrawn in writing.
11.10 Entire Agreement
All Exhibits to this Agreement shall be incorporated in and constitute
parts of this Agreement. This Agreement and the Exhibits, each as amended from
time to time, constitute the entire understanding between the parties in
relation to the subject matter hereof and supersede all prior discussions,
agreements and representations related to this subject matter, whether oral or
written and whether or not executed by a Party. Unless otherwise provided in
this Agreement, no modification, amendment or other change may be made to this
Agreement or any part thereof unless reduced to writing and executed by
authorized representatives of all Parties.
In witness whereof, the Parties have duly entered into this Agreement as of
the date first written above.
Amazon.com: Company:
Amazon.com, Inc. drugstore.com, Inc.
By: /s/ Alan Caplan By: /s/ David Rostov
-------------------------------- --------------------------------
Vice President and Vice President and
General Counsel Chief Financial Officer
Amazon.com D:
Amazon.com D, Inc.
By: /s/ Alan Caplan
--------------------------------
Secretary
PAGE 19
<PAGE>
EXHIBIT A
Advertising Placements
The advertising placements to be provided by Amazon.com during the Launch
Period are as follows:
1. Advertising of the Company Site on Amazon.com's Home Page for a three
(3) month trial period beginning on the date the Company Site has reached agreed
upon quality and scalability criteria.
2. Advertising of the Company Site on Amazon.com's post-sale page for a
three (3) month trial period beginning on the date the Company Site has reach
agreed upon quality and scalability criteria.
3. Sponsorship of Amazon.com's Health, Beauty, and Wellness browse area
for a five (5) month rotation through the top-level browse page plus various
Health, Beauty, and Wellness bestseller lists.
4. Other placements as mutually agreed upon by the Parties.
PAGE 1
<PAGE>
EXHIBIT 10.15
CONFIDENTIAL TREATMENT REQUESTED
RxAMERICA
PHARMACY SERVICES AGREEMENT
This PHARMACY SERVICES AGREEMENT by and between RxAMERICA L.L.C. ("RxAMERICA")
and DS PHARMACY, INC. ("DS") is effective as of February 8, 1999 ("Effective
Date").
RECITALS
WHEREAS RxAMERICA dispenses prescription drugs through the mail; and
WHEREAS DS is a licensed pharmacy that desires to provide certain prescription
drug services via the Internet; and
WHEREAS DS desires RxAMERICA to dispense prescription drugs through the mail for
certain customers of DS.
THEREFORE, RxAMERICA and DS agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "This Agreement" means and includes this Pharmacy Services Agreement,
Implementation Documents, and all exhibits, addenda, and attachments.
1.2 "Average Wholesale Price" or "AWP" means the current average wholesale
price for the actual package size used of a prescription drug as published
by Medispan, Inc. or another nationally recognized price source selected by
RxAMERICA and reasonably acceptable to DS.
1.3 "Brand Name Drug" means an FDA approved drug, which is manufactured and
distributed by an innovator drug company, or its licensee, which has
undergone testing for safety and efficacy for the FDA under an
Investigational New Drug Application sponsored by the innovator drug
company, and which has a proprietary name assigned to it by the
manufacturer or distributor, or an FDA approved drug which is defined by
Medispan, Inc., or another nationally recognized source selected by
RxAMERICA, as a brand name drug.
1.4 "Co-payment" means a dollar amount or percentage of cost that an Eligible
Person, who is covered for prescription drug benefits by Third Party
Insurance, is responsible for paying for prescription drugs and includes,
without limitation, coinsurance, co-pay, and deductible.
1.5 "Covered Drugs" means: (i) pharmaceutical products sold by DS to Eligible
Persons that are not covered by a third party prescription drug insurance
program, or (ii) a selected list of pharmaceutical products adopted by a
Third Party Prescription Drug Insurance program that may be dispensed by
RxAMERICA to DS for Eligible Persons.
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
<PAGE>
1.6 "Delivery Point" means the staging area in the RxAMERICA Facility where
packaged and sealed Prescriptions, labeled and ready for shipment, are
delivered by RxAMERICA to DS.
1.7 "Eligible Person" means a person who has an arrangement with DS to obtain
prescription drugs from DS through its Web Site or by other means.
1.8 "Generic Drug" means an FDA approved drug, which is manufactured and
distributed under the approval of the FDA through an Abbreviated New Drug
Application, which is identified by its chemical or non-proprietary name
(as determined by the United States Adopted Names Council), and which is
listed in the FDA's Approved Drug Products with Therapeutic Equivalence
Evaluations publication (the "Orange Book") as therapeutically equivalent
and interchangeable with drugs having an identical amount of the same
active ingredients, or a drug which is defined by Medispan, Inc., or
another nationally recognized source selected by RxAMERICA, as a Generic
Drug.
1.9 "Implementation Document" means the document that DS completes and provides
to RxAMERICA when DS desires RxAMERICA to perform Pharmacy Services for
Eligible Persons covered by Third Party Insurance. The Implementation
Document shall verify that DS is authorized to fill prescriptions for
Eligible Persons under the applicable Third Party Insurance plan and shall
set forth all information that RxAMERICA deems necessary to provide
Pharmacy Services pursuant to the arrangement between DS and such Third
Party Insurance plans. The Implementation Document is to be utilized and
relied upon by RxAMERICA in providing Pharmacy Services under this
Agreement.
1.10 "Maximum Allowable Cost List" or "HCFA MAC List" means the list of certain
drugs generated by the Health Care Financing Administration that states the
amount that HCFA compensates pharmacies for the ingredient cost for
multisource Generic Drugs.
1.11 "Pharmacy Services" means performing the physical activities involved in
filling a Prescription, performing quality control functions for the
filling process, and delivering the prescription drug to DS at the Delivery
Point after DS personnel receive the Prescription, enter the Prescription
into the RxAmerica prescription processing computer system, check the
Prescription for compliance with all applicable laws and regulations, check
the Prescription for therapeutic problems and other problems, and take all
actions necessary to resolve therapeutic problems and other problems.
1.12 "Prescribing Provider" means a doctor of medicine or other health care
professional who is legally authorized to prescribe drugs.
1.13 "Prescription" means a lawful order for a prescription drug authorized by a
Prescribing Provider for an Eligible Person whether communicated or
conveyed to RxAMERICA or DS by the Prescribing Provider, the Prescribing
Provider's agent, the person for whom the prescription is intended, or that
person's agent. Prescription includes an original or refill order for a
prescription drug.
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1.14 "RxAMERICA Facility" means the RxAMERICA licensed pharmacy and distribution
facility located at 5450 North Riverside Dr., Ft. Worth, TX 76137.
1.15 "Shipping Services" means the receipt of a filled, packaged Prescription
from the Delivery Point and the delivery of the Prescription to the
appropriate Eligible Person. Shipping Services may be provided by
RxAMERICA.
1.16 "Third Party Prescription Drug Insurance" or "Third Parry Insurance" means
an insurance or other program by which an insurance company or other entity
compensates a pharmacy directly for prescriptions dispensed to Eligible
Persons.
1.17 "Web Site" or "DS's Web Site" means the Internet site developed and
maintained by DS through which individuals can order prescription drugs for
personal use.
ARTICLE 2
RELATIONSHIP OF RXAMERICA AND DS
2.1 The relationship between RxAMERICA and DS is that of independent entities
contracting for the sole purpose of carrying out the provisions of this
Agreement. Nothing herein or otherwise shall be construed to create any
other relationship, including without limitation, that of employee, agent
or representative. The Parties further agree that RxAMERICA shall not be a
plan fiduciary and shall not exercise discretion, authority, or control
regarding administration of any employee benefits plan by virtue of its
activities in performing this Agreement.
2.2 This Agreement is between RxAMERICA and DS and is not intended to create
any rights or remedies in favor of any other person or entity, including
without limitation, any Eligible Person or any Third Party Insurance plan.
ARTICLE 3
RESPONSIBILITIES OF DS
3.1 DS shall compensate RxAMERICA according to the terms in Article 5 and in
Attachment A, and as set forth elsewhere in this Agreement.
3.2 DS is responsible for federal, state and local sales tax liability for
Covered Drugs dispensed to or goods and services supplied to an Eligible
Person or to DS. Sales tax is defined as an excise tax based on consumer
retail sales whether designated as a sales tax, gross receipts tax, retail
occupation tax, value added tax or tax otherwise titled or styled. It
includes any tax in existence or hereafter created, whether or not the
bearer of the tax is the retailer or consumer, but does not include any tax
based on the revenues or income of RxAMERICA.
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3.3 DS shall locate at the RxAMERICA Facility adequately trained and licensed
personnel to perform certain functions in the prescription approval and
authentication process for Prescriptions for Eligible Persons. DS's
personnel shall: [*] All such DS personnel, unless otherwise agreed to by
the parties, will perform these functions at the RxAMERICA Facility.
3.4 DS shall be responsible for the actions and failures to act of the
personnel it provides under Article 3.3. DS agrees that such personnel
shall be employees or contractors of DS and shall not be employees or
contractors of RxAMERICA. DRUGSTORE shall be responsible for: (i)
compensating such personnel, including but not limited to direct
compensation and all employee benefits; (ii) payroll and other taxes
associated with such personnel; (iii) all insurance associated with such
personnel, including but not limited to workers compensation and liability
insurance; (iv) complying with all state and federal laws and regulations
regarding such personnel, (v) training employees regarding sexual
harassment and implementing reasonable and adequate sexual harassment
policies and procedures; and (vi) all other responsibilities that are
normally associated with employers and/or contractors.
3.5 Prior to the time RxAMERICA is required to provide Pharmacy Services for a
Prescription, DS personnel will enter sufficient information into
RxAMERICA's prescription processing computer system to allow RxAMERICA to
perform Pharmacy Services. RxAMERICA may rely solely on the information
provided by DS to determine whether any prescription should be dispensed
under this Agreement. By entering such information into RxAMERICA's
prescription processing computer system, DS authorizes RxAMERICA to perform
Pharmacy Services for the Prescription so entered.
3.6 DS is responsible for receiving all Prescriptions at the RxAMERICA Facility
that RxAMERICA is expected to fill under this Agreement. As soon as
practical after execution of this Agreement, the parties will establish a
transfer procedure for the transfer of Prescriptions from DS to RxAMERICA
and will obtain approval of the transfer procedure from any required
regulatory authorities.
3.7 DS shall inform Eligible Persons to order refill Prescriptions through the
DS Web Site by entering an appropriate Prescription number and any other
necessary information. Eligible Persons (or their representatives) may
order Prescription refills directly from RxAMERICA; provided, that all such
Prescription refills will be treated as if they originated from the DS site
and all terms of this Agreement shall otherwise apply.
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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<PAGE>
3.8 DS shall be responsible for collecting all payments from Eligible Persons,
including but not limited to cash, checks, credit and debit cards,
electronic payment, and Co-payments, for all Prescriptions filled under
this Agreement.
3.9 DS shall provide Eligible Persons with all information necessary to allow
Eligible Persons to use Pharmacy Services under this Agreement.
3.10 DS will provide a toll-free number that will be accessible to Eligible
Persons for inquiries regarding medications dispensed under this Agreement.
3.11 DS will develop, at its sole expense, a user-interface to allow Eligible
Persons to order and reorder Prescriptions. DS will own all such user-
interfaces that are external to RxAMERICA's mail order pharmacy system and
that are developed by or paid for by DS and all intellectual property
rights for such user-interfaces. Nothing in this Agreement shall give DS
any right, title, or interest in and to any intellectual property or
computer code in RxAMERICA's mail order pharmacy system.
3.12 DS is responsible for the development, operation, and maintenance of all
user-interface systems, computer firewall systems between the Web Site
(including all DS systems accessible by the public) and RxAMERICA's mail
order pharmacy system, and the messaging systems external to RxAMERICA's
mail order pharmacy system. DS will own all such user-interfaces and
software which are external to RxAMERICA's mail order pharmacy system
developed by or paid for by DS and all intellectual property rights for
such user-interfaces and software.
3.13 DS shall use commercially reasonable efforts to maintain its Web Site
throughout the term of this Agreement. If DS ceases operating its Web Site,
DS shall notify RxAMERICA as soon as it intends to cease the operation, but
in no event shall DS notify RxAMERICA of the cessation of its Web Site less
that thirty (30) days prior to the date operation of the Web Site ceases.
3.14 DS will provide RxAMERICA with an Implementation Document substantially in
the form attached as Amendment B hereto, signed by an authorized
representative of DS, whenever DS will receive compensation directly from a
Third Party Insurance plan for Prescriptions purchased from and filled by
RxAMERICA under this Agreement. DS shall provide the Implementation
Document for each Third Party Insurance plan within a reasonable time prior
to the time that RxAMERICA will be required to fill Prescriptions for such
Eligible Persons as necessary to permit RxAMERICA to perform its duties
under this Agreement. Each Implementation Document shall be incorporated by
reference as part of this Agreement.
3.15 DS shall be responsible for providing all material information to Third
Party Insurance plans regarding RxAMERICA's role in providing Pharmacy
Services, including, but not limited to, RxAMERICA's use of DS's NCPDP
number.
3.16 DS shall notify RxAMERICA immediately if DS suspends business, becomes
insolvent, makes an assignment for the benefit of creditors or becomes
unable to pay its debts, or if any bankruptcy proceeding is filed by or
against DS or any subsidiary or affiliate of DS, or if a receiver is
appointed for any of DS's property.
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CONFIDENTIAL TREATMENT REQUESTED
3.17 DS shall be responsible for compliance with Federal Trade Commission
regulations regarding mail order merchandise, including, but not limited to
16 CFR 435.
ARTICLE 4
RESPONSIBILITIES OF RXAMERICA
4.1 RxAMERICA will provide Pharmacy Services for Covered Drugs to DS for
Eligible Persons under the terms of this Agreement for the compensation
rate set forth in Attachment A.
4.2 RxAMERICA will provide Pharmacy Services through the RxAMERICA Facility.
4.3 RxAMERICA shall provide Pharmacy Services to DS for Prescriptions for
Eligible Persons in accordance with all applicable federal and state laws
and regulations applicable in Texas and all other states to which
Prescriptions are being sent.
4.4 RxAMERICA will use commercially reasonable efforts fill and package
Prescriptions and deliver such Prescriptions to DS at the Delivery Point
within the time periods specified in Section 1(e) of Attachment A, and in
any event: (i) [*] and (ii) thereafter, filled and packaged at the
RxAMERICA Facility; RxAMERICA shall deliver to the Delivery Point, filled
and packaged Prescriptions within 48 hours of receipt of the Prescription
from DS.
4.5 RxAMERICA has no obligation to dispense any drug to any Eligible Person
until:
(a) DS or its agent has provided RxAMERICA the following information:
(i) that the Prescription meets all legal requirements, and (ii)
that DS has not detected any therapeutic problems or other
material problems with the Prescription or that any problems
detected have been satisfactorily resolved.
(b) The dispensing pharmacist determines that in his or her
professional judgment the prescription drug should be dispensed.
(c) By entering a Prescription into the dispensing queue DS and its
employees and agents represent and warrant that the conditions
under Article 4.5(a) have been met.
4.6 RxAMERICA will provide DS with the information necessary for Eligible
Persons to use RxAMERICA's Pharmacy Services.
4.7 RxAMERICA will, in a form mutually agreed upon by the parties, provide DS
with financial reports as agreed to by the parties from time to time and
utilization and quality assurance reports on a monthly basis.
4.8 [*]
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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4.9 RxAMERICA will deliver all Prescriptions to DS at the Delivery Point at
which point in time title to the Prescription will pass to DS.
4.10 RxAMERICA will ship Prescriptions on behalf of DS from the Delivery Point
to Eligible Persons as instructed by DS. DS will pay RxAMERICA's cost of
shipment as specified in Attachment A.
4.11 Once a Prescription is filled and packaged by RxAMERICA and delivered to
the Delivery Point, DS shall bear the risk of loss and damage. However, if
RxAMERICA provides Shipping Services to DS for a Prescription, RxAMERICA
shall bear the risk of in-transit loss and damage, and all transportation
charges for such Prescription if it is returned, including any return
shipping charges.
ARTICLE 5
COMPENSATION
5.1 For performing Pharmacy Services for DS on behalf of an Eligible Person, DS
will compensate RxAMERICA in accordance with the rates set forth in
Attachment A on the payment terms set forth in this Article 5.
5.2 If RxAMERICA provides Shipping Services for DS for a Prescription, DS will
reimburse RxAMERICA for actual posting and shipping charges in accordance
with Section 1(c) on Attachment A.
5.3 RxAMERICA shall invoice DS in accordance with the charges set forth in
Attachments A every two weeks on a schedule agreed to by the parties. for
all Prescriptions delivered by RxAMERICA to DS during the prior two week
period. The invoice format will be mutually agreed upon by both parties.
RxAMERICA will send invoices to DS at the address listed on the signature
line of this Agreement
5.4 DS will pay in full, via wire transfer or next-day delivery, all invoices
submitted by RxAMERICA within ten (10) days of receipt of the invoice.
Invoices that are not paid within ten (10) days of receipt shall be deemed
to be untimely and past due. DS must pay each invoice with one check or
with one wire transfer payment.
5.5 If DS believes it is entitled to an adjustment of an invoice, DS must:
(a) Pay the undisputed amount of the subject invoice in accordance
with Article 5.2;
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(b) Notify RxAMERICA in writing of any requested adjustment within 45
days after the end of each DS fiscal quarter (currently each
calendar quarter); and
(c) Provide RxAMERICA with specific claims, reference invoice, and
the reason DS believes disputed amounts should not be paid.
Notwithstanding Article 21.2, failure to notify RxAMERICA of any adjustment
within the earlier of (i) the time period specified in Article 5.5(b), or
(ii) 30 days after the completion of an audit by DS pursuant to Article 19,
shall be deemed a waiver of DS's right to such adjustment.
5.6 The rates set forth in Attachment A, and any other rates or fees in this
Agreement shall be reviewed at least quarterly and may be adjusted upon the
mutual written consent of the parties.
5.7 Payment for invoices that are past due under Article 5.4 will accrue
interest from the invoice date at a rate of (1-1/2%) per month, or prorated
portion of a month, on the outstanding balance. DS shall reimburse
RxAMERICA for all collection costs, including attorney fees incurred by
RxAMERICA as a result of any payment default by DS under this Agreement.
5.8 In the event invoices that in the aggregate total more than $10,000 become
past due, RxAMERICA has the right to discontinue providing services for
Eligible Persons until DS is current with all payments past due. If DS is
untimely in paying invoices that are greater than $10,000 more than two (2)
times in any quarter, RxAMERICA has the right to deem such untimely
payments a material breach.
5.9 Notwithstanding Article 5.8, in the event any invoice of more than $10,000
becomes past due by more than fifteen (15) days after notice of such
delinquency has been provided to DS, RxAMERICA has the right to deem the
failure to pay such invoices a material breach.
5.10 DS guarantees it has the ability to and will pay RxAMERICA as required by
this Agreement. DS shall provide satisfactory evidence of this ability upon
request to RxAMERICA. DS shall furnish its most recent audited financial
statement to RxAMERICA prior to the Effective Date of this Agreement and
thereafter shall furnish its annual audited statement to RxAMERICA as soon
as practical after the end of each year.
ARTICLE 6
WARRANTIES AND LIABILITY
6.1 RxAMERICA warrants that its provision of Pharmacy Services under this
Agreement will comply at all times with the requirements of the U.S.
Federal Food, Drug and Cosmetic Act, if applicable, and any other federal
or state laws or regulations governing the sale and dispensing of
prescription drugs. EXCEPT FOR THIS WARRANTY AND WARRANTIES EXPRESSLY
STATED ELSEWHERE IN THIS AGREEMENT, NEITHER RxAMERICA NOR DS MAKES ANY
EXPRESS OR IMPLIED WARRANTIES RELATING TO THE PRODUCTS AND SERVICES COVERED
BY THIS AGREEMENT. THE PARTIES EXPRESSLY DISCLAIM
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ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
6.2 NEITHER PARTY NOR ITS AGENT(S), REPRESENTATIVE(S) OR EMPLOYEE(S) SHALL BE
LIABLE TO THE OTHER PURSUANT TO THIS AGREEMENT FOR ANY INDIRECT,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF THE OTHER PARTY, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY, EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NOTHING IN THIS ARTICLE 6.2 IS
INTENDED TO LIMIT A PARTY'S RIGHT TO INDEMNIFICATION OR CONTRIBUTION FROM
THE OTHER PARTY FOR CLAIMS ASSERTED BY A THIRD PARTY.
ARTICLE 7
NO EXCLUSION FROM FEDERAL HEALTH CARE PROGRAMS
7.1 RxAMERICA and DS each warrants and represents that:
(a) It is not excluded from participation in any federal health care
programs, as defined under 42 U.S.C. section 1320a-7b(f); and
(b) To its knowledge, there are no pending or threatened governmental
investigations that may lead to such exclusion.
7.2 Each party agrees to notify the other party of the commencement of any such
exclusion within seven (7) days of first learning of such an event.
7.3 Either party shall have the right to immediately terminate this Agreement
upon learning of any such exclusion of the other party.
ARTICLE 8
INSURANCE AND INDEMNITY
8.1 RxAMERICA shall indemnify and hold DS, its officers, directors, employees,
agents and its members, parents, subsidiaries, corporate affiliates, and
their officers, directors, employees, and agents (each an "Indemnified
Party") harmless against any claim, injury, damage, loss, expense
(including attorneys' fees), demand, or judgment asserted against or
incurred by any Indemnified Party arising out of: (i) a breach of the
Agreement by RxAMERICA or (ii) any negligent, reckless, willful, or
criminal act or failure to act of RxAMERICA, its agents, representatives,
or employees in performing this Agreement.
8.2 DS shall indemnify and hold RxAMERICA, its officers, directors, employees,
agents, and its members, parents, subsidiaries, corporate affiliates, and
their officers, directors, employees, and agents (each an "Indemnified
Party") harmless against any claim, injury, damage, loss, expense
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(including attorneys' fees), demand, or judgment asserted against or
incurred by any Indemnified Party arising out of: (i) a breach of the
Agreement by DS or (ii) any negligent, reckless, willful, or criminal act
or failure to act of DS, its agents, representatives, or employees in
performing this Agreement.
8.3 In the event DS excludes or restricts any medications, DS agrees to
indemnify and hold RxAMERICA, its officers, directors, employees, agents,
and its members, parents, subsidiaries, corporate affiliates, and their
officers, directors, employees, and agents (each an "Indemnified Party")
harmless against any claim, injury, loss, expense (including but not
limited to attorneys' fees), demand or judgment asserted against or
incurred by any Indemnified Party arising out of DS's exclusion or
restriction of any medication. This Article 8.3 is not intended to limit
the effect of Article 8.2.
8.4 Each party shall procure and maintain at all times while this Agreement is
in effect such policies of general and professional liability insurance as
shall be necessary to insure it and its employees against those claims for
damages arising by reason of personal injury or death occasioned by its
activities in connection with and as required by this Agreement. RxAMERICA
may self-insure (if handled by a third party carrier) and shall provide
sufficient financial data upon the request of DS to support RxAMERICA's
ability to cover such liabilities.
ARTICLE 9
TERM AND TERMINATION
9.1 The parties are bound by this Agreement from the Effective Date or from
time both parties have executed this Agreement, whichever is earlier. The
initial term shall last until one (1) year from the Effective Date. This
Agreement shall thereafter automatically renew for successive terms of one
(1) year each unless either party provides the other party written notice
that it will not renew the Agreement no less than sixty (60) days prior to
the end of the initial term or a successive term.
9.2 In the event of a material breach of this Agreement, by either party, the
other party may notify the party of material breach in writing specifying
the manner in which this Agreement has been materially breached, and this
Agreement shall terminate automatically thirty (30) days after such notice
unless the material breach has been cured to the reasonable satisfaction of
the non-breaching party. If RxAMERICA deems failure to pay a material
breach under Article 5.8 or 5.9, DS shall have no right to cure.
9.3 RxAMERICA shall have failed to perform under this Agreement if RxAMERICA
fails to meet the performance criteria set forth in Section 4.4(i) or (ii)
with respect to 15% or more of the Prescriptions filled during any three
consecutive day period within any 15 consecutive day period. DS will notify
RxAMERICA if it has failed to perform for three consecutive days. RxAMERICA
shall use its best efforts to immediately correct the problem. However, if
such a lack of performance occurs in two consecutive 15-day periods or more
than four times in 90-day period, DS shall have the right to terminate this
Agreement immediately upon notice without any additional cure period.
Notwithstanding termination by DS under this Article 9.3 or
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RxAMERICA's failure to meet performance criteria, DS shall remain obligated
to pay any proper invoices for Pharmacy Services or Shipping Services
performed by RxAMERICA prior to the termination of this Agreement.
9.4 If at any time during the term of this Agreement there shall be filed by or
against either party in any court pursuant to any statute either of the
United States or any State a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of that party's property, or if either party makes an assignment
for the benefit of creditors or petitions for or enters into such an
assignment, the other party may immediately terminate this Agreement upon
written notice to such party who filed or against whom was filed such
petition or who made petition or entered into such assignment.
ARTICLE 10
EFFECT OF TERMINATION
Except as herein otherwise provided, this Agreement shall be of no further
force or effect as of the date of termination except that each party will
remain responsible for all obligations or liabilities arising from
activities carried on by such party or its agents or employees during the
period this Agreement was in effect and shall remain responsible for paying
all legitimate invoices outstanding as of the date of termination.
ARTICLE 11
CONFIDENTIALITY
11.1 The software, and similar documents or information provided by RxAMERICA to
DS are proprietary and shall remain the sole property of RxAMERICA. All
software and other information provided by DS to RxAMERICA are proprietary
and shall remain the sole property of DS. The information contained in such
documents and any data obtained by virtue thereof are considered
confidential to the disclosing party and shall not be released by the
receiving party to any third party without the written consent of the
disclosing party. In addition, the terms of this Agreement are confidential
and shall not be disclosed or released by a party without the consent of
the other party, except that either party may disclose the terms of this
Agreement in connection with any financing to a potential investor.
11.2 Unless otherwise provided in this Agreement, neither party will release to
any third party without the other party's consent any information relating
to the other party which was obtained as a result of, or incident to, the
relationship described in this Agreement provided such information is not
publicly known or otherwise available on a non-confidential basis. The
parties may, however, disclose information to third parties: (i) as
required by applicable law or government order (including federal
securities laws); (ii) as necessary to execute and perform this Agreement;
and/or (iii) as necessary in the event of a dispute between RxAMERICA and
DS.
11.3 Each party agrees that the other may use and provide to third parties drug
and related medical data obtained by it in performing this Agreement for
research, cost analysis, cost comparison, or
11
<PAGE>
other business purposes as long as individual Eligible Persons cannot be
identified by such information. However, RxAMERICA may use such information
only for its own internal business purposes, and shall not sell or
otherwise transfer such information to third parties without DS's prior
written consent. All information relating to Eligible Customers on any
RxAMERICA database or other system, shall be transferred to DS promptly
upon DS's request. RxAMERICA may keep copies of such information to the
extent required by law.
11.4 For the purposes of this Article 11, "third party" shall include, but is
not limited to: (i) any parent or subsidiary corporation of either party to
this Agreement, (ii) any person or entity that is not an employee of a
party to this Agreement or under contract with a party to this Agreement,
and (iii) any individual or entity, including an employee, who does not
have a reasonable need to know the confidential information involved.
11.5 The parties acknowledge that any breach of confidentiality would cause
irreparable harm. In the event of such a breach, the non-breaching party
shall have a right to an injunction or other equitable relief in addition
to any remedies at law.
11.6 This Article 11 shall survive termination of this Agreement.
ARTICLE 12
ADVERTISING
Each party retains the exclusive right to its names and logos, together
with all distinctive trademarks and/or service marks. Upon termination of
this Agreement, each party agrees to immediately discontinue the use of any
name, symbol or trademark belonging to the other party.
ARTICLE 13
NOTICES
13.1 Any notices or other communications required or permitted hereunder shall
be sent by courier, FAX, computer (receipt of which is confirmed), or by
regular U.S. Mail to the address for each party indicated on the signature
page of this Agreement. The address may be changed by written notice
thereof to the other party.
13.2 Any notices or other communications given hereunder shall be deemed given
upon receipt in the case of courier, FAX, or computer delivery and on the
fifth day following the date of mailing in the case of mail delivery.
ARTICLE 14
ASSIGNMENT
14.1 This Agreement may not be assigned to any other person or entity without
the express written consent of the other party to this Agreement, which
consent may not be unreasonably withheld.
12
<PAGE>
Any attempted assignment without the other party's express written consent
shall be void and of no force and effect.
14.2 Notwithstanding the foregoing Article 14.1, no consent shall be required if
this Agreement is assigned to an entity with equal or greater financial
strength than the assigning party.
14.3 The party attempting assignment shall provide notice to the other party at
least ten (10) business days prior to the assignment.
ARTICLE 15
FORCE MAJEURE
A party shall not be deemed to have breached this Agreement if its delay or
failure to perform all or any part of its obligations hereunder results
from a condition beyond its reasonable control, including without
limitation, acts of God or the public enemy, fire, earthquake, flood,
storm, strike or other labor unrest, power or communication line failure,
or statute, or rule or action of any federal, state or local government or
agency.
ARTICLE 16
AMENDMENTS
This Agreement may not be amended or modified by either party without the
express written consent of the other, except as otherwise provided in this
Agreement and except that RxAMERICA may amend this Agreement to comply with
applicable laws or regulations.
ARTICLE 17
APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Utah without
regard to choice of law provisions. Except as provided in Article 18, the
parties hereby submit to the jurisdiction of the state and federal courts
in Utah. The parties further agree that any action shall be filed in Utah
and that the venue for adjudication shall be Utah.
ARTICLE 18
DISPUTE RESOLUTION
The parties agree to submit all disputes in which the amount in controversy
is $25,000 or less to binding arbitration. No other disputes arising under
this Agreement shall be arbitrated. Except as specifically provided in this
Article 18, the arbitration shall be conducted in accordance with the
American Arbitration Association Commercial Arbitration Rules. However, the
arbitration need not be administered by the American Arbitration
Association. The arbitration under this Article 18 shall be conducted
within one hundred and twenty (120) days of the demand for
13
<PAGE>
arbitration and shall be adjudicated by a single arbitrator chosen by
mutual agreement of the parties. The arbitration hearing shall occur in
Salt Lake City, Utah. The Utah Arbitration Act shall apply to the
arbitration conducted under this Article 18 unless it is preempted by the
Federal Arbitration Act, in which case the Federal Arbitration Act shall
apply. Discovery for the arbitration shall be limited to the exchange of
relevant documents. RxAMERICA and DS shall equally share in the
administrative fees and the fees for the arbitrator. RxAMERICA and DS shall
each bear its own costs and attorneys' fees, except as provided in Article
5.7.
ARTICLE 19
AUDIT RIGHTS
RxAMERICA will allow DS to conduct audits of RxAMERICA's current activities
or of activities for the period of one year prior to the date of DS's
request for an audit or such longer period as may be required by law,
including applicable pharmacy regulations, or up to three years prior to
the date of DS's request if such request is pursuant to requirements under
agreements between DS and Third Party Insurance plans. Such audit may be
conducted by DS's employee or agent who is mutually agreed upon by
RxAMERICA and DS. RxAMERICA's approval of such employee or agent shall not
be unreasonably withheld. If an audit of RxAMERICA is permitted or required
by an agreement between DS and a Third Party Insurance plan for Pharmacy
Services rendered by RxAMERICA under this Agreement, such audit shall be
conducted by the Third Party Insurance plan's employee or agent who is
agreed upon by RxAMERICA. RxAMERICA's approval of such employee or agent
shall not be unreasonably withheld. The Third Party Insurance plan
representative must sign an agreement to keep all information discovered
during the audit confidential and to not disclose any information
discovered during the audit to any person or entity other than the Third
Party Insurance plan, DS or RxAMERICA or as otherwise required by law. Each
of DS and each Third Party Insurance plan is permitted to conduct only one
audit in any six (6) month period unless a prior audit has exposed material
problems. Any audit conducted under this Article 19 is limited to reviewing
Pharmacy Services provided by RxAMERICA under this Agreement and to the
RxAMERICA Facility's records, pharmacy licenses, registration and
operations directly relating to performing Pharmacy Services. Such audits
will be conducted at DS's or the Third Party Insurance plan's expense
during normal business hours upon at least fourteen (14) days prior written
notice to RxAMERICA and shall not unreasonably interfere with RxAMERICA's
normal business operations. RxAMERICA shall retain records that may be
audited under this Article 19 for the longer of (i) the period required by
applicable laws and (ii) five years. No person or entity other than DS has
a right to obtain payment from RxAMERICA under this Agreement on the basis
of any information discovered during an audit or on any other basis.. To
the extent any Third Party Insurance plan desires different terms than
those outlined above, the parties will negotiate in good faith the terms
under which RxAMERICA and DS will implement such requests.
14
<PAGE>
ARTICLE 20
RxAMERICA COVERED LIVES
RxAMERICA provides certain pharmacy services under agreements with third
parties ("Other Agreements"). These services may be provided through a mail
service pharmacy, a network of retail pharmacies, or by a combination of
these two. For services provided under this Agreement for persons covered
by Other Agreements ("Covered Lives"), the parties to this Agreement
anticipate that RxAMERICA will receive compensation as set forth in the
Other Agreements. Furthermore, the parties to this Agreement anticipate
that RxAMERICA will pay DS a per Prescription fee for each Prescription
ordered by Covered Lives via the DS Web Site and that RxAMERICA will
compensate DS, in a manner yet to be determined, for Prescriptions filled
under its retail agreements, as authorized by those agreements. The parties
will negotiate in good faith the specific arrangements for handling
Prescriptions covered by Other Agreements by February 15, 1999.
ARTICLE 21
MISCELLANEOUS PROVISIONS
21.1 This Agreement constitutes the entire Agreement between RxAMERICA and DS
and supersedes any and all prior agreements or understandings between the
parties.
21.2 No waiver of any provision of this Agreement shall be deemed to constitute
or shall constitute a waiver of any other provision hereof, whether or not
similar, nor shall any waiver constitute a continuing waiver. Except as
provided elsewhere in this Agreement, no waiver shall be binding unless
executed in writing by the party making the waiver.
21.3 In the event any term or provision contained in this Agreement shall be
determined to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforcement of any other
term or provision in this Agreement.
21.4 The parties agree that this Agreement was reached through the negotiation
of the parties, and that no presumption shall attach to the party drafting
this Agreement regarding the construction, operation or interpretation of
this Agreement.
21.5 If there is a conflict between the language of this Pharmacy Services
Agreement and the language of the Implementation Document, attachments,
exhibits, addenda, or other documents that are incorporated as part of this
Agreement, the language of this Pharmacy Services Agreement shall govern.
21.6 The headings used in this Agreement are solely for convenience and shall
have no effect on the interpretation of this Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
DS PHARMACY, INC. RxAMERICA L.L.C.
By: /s/ Tracy R. Nolan By: /s/ Jerry Mark De Bruin
---------------------------- -----------------------------------
Signature Signature
Tracy R. Nolan Jerry Mark De Bruin
---------------------------- -----------------------------------
Name Name
Vice President - Operations General Manager
---------------------------- -----------------------------------
Title Title
Address: 18650 NE 67th Court Address: 369 Billy Mitchell Road
-------------------------- ----------------------------
Redmond, WA 98052 Salt Lake City, UT 84116
-------------------------- ----------------------------
Telephone: (425) 881-5131 Telephone: (801) 961-6000
-------------------------- ----------------------------
Fax: (425) 881-8931 Fax: (801) 961-6008
-------------------------- ----------------------------
Date: 2-10-99 Date: 2-10-99
-------------------------- ----------------------------
16
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT A
to
PHARMACY MAIL SERVICE AGREEMENT
[*]
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
<PAGE>
ATTACHMENT B
to
PHARMACY MAIL SERVICE AGREEMENT
Third-Party Insurance Programs
Implementation Document
Minimum data set to be provided to RxAmerica to set up new Third Party Insurance
plans pursuant to Section 3.14 of the Pharmacy Services Agreement between
RxAmerica L.L.C. and DS Pharmacy, Incdated February 8, 1999 (the "Agreement").
1. Processor Name
2. Processor Phone Number
3. BIN Number
4. Processor Control Number
<PAGE>
EXHIBIT 10.16
CONFIDENTIAL TREATMENT REQUESTED
SUPPLY AND SERVICES AGREEMENT
This Agreement is made and entered into this 29th day of January, 1999, by
and between Walsh Distribution, Inc., an Arkansas Corporation having a principal
place of business at 5005 State Line Avenue, Texarkana, Bowie County, Texas,
75501 (hereinafter referred to as "Walsh"), and DRUGSTORE.COM, INC., a Delaware
Corporation, having its principal place of business at 18650 NE 67th Court,
Redmond, Washington 98032 (hereinafter referred to as "Drugstore").
WHEREAS, Walsh is a wholesale supplier and distributor of prescription
drugs, pharmaceuticals, health and beauty care products and other over the
counter products customarily sold in retail pharmacies; and
WHEREAS, Drugstore is in the process of establishing an internet based on-
line shopping site for the retail sale of products customarily sold in retail
pharmacies; and
WHEREAS, Drugstore desires to purchase from Walsh certain items, to furnish
other items from sources other than Walsh, and to provide for the packaging for
both such products by Walsh for shipment by Drugstore to its customers who order
said products from its internet based on-line shopping site; and
WHEREAS, Walsh desires to sell specified products to Drugstore, to package
said products together with products provided by Drugstore and deliver the same
to Drugstore for sale by Drugstore to its customers through Drugstore's internet
based on-line shopping site;
NOW, THEREFORE, in consideration of the mutual obligations and promises and
additional consideration set forth herein, Walsh and Drugstore agree as follows:
1. Definitions.
The following terms shall have the definitions as set forth below.
(a) Walsh Inventory - those items, products and goods owned by Walsh to be
sold to Drugstore consisting initially of approximately [*] shelf
keeping units (SKU), currently purchased as inventory by Walsh for its
own account together with those additional line items which Walsh
agrees to add to its inventory at the request of Drugstore.
(b) Drugstore Inventory - those items, products and goods owned by
Drugstore and supplied to Walsh with the approval of Walsh (which
shall not be unreasonably withheld) for packaging for shipment to
Drugstore's on-line customers consisting initially of approximately
[*] shelf keeping units (SKU) not currently purchased as inventory by
Walsh but which Drugstore desires to make available to its customers.
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(c) Line - means one or more items of the same shelf keeping unit (SKU) as
that term is customarily used in the pharmaceutical and health and
beauty care products wholesale industry.
(d) Deadnet Cost - means the manufacturer's wholesale list price reduced
by applicable vendor allowances and cash discount, if any.
(e) Delivery Point - the staging area in the building located at 5101A
Stateline Avenue, Texarkana, Bowie County, Texas, where packaged and
sealed goods, labeled and ready for shipment, are delivered by Walsh
to Drugstore. Walsh shall determine and designate the staging area.
2. Walsh inventory.
Walsh agrees to sell and Drugstore agrees to buy Walsh Inventory to supply
orders of goods made by customers of Drugstore on its internet based on-line
shopping site during the term of this agreement upon the following terms:
(a) The price to be paid by Drugstore for items of Walsh Inventory shall
be the current Deadnet Cost plus [*] of Deadnet Cost for each item
purchased by Drugstore.
(b) Walsh shall bill Drugstore daily for Walsh Inventory purchased by
Drugstore.
(c) Drugstore shall pay Walsh within 15 days of invoice date by electronic
funds transfer to the following account:
[*]
ABA #: [*]
Account Name: Walsh Distribution, Inc.
Account #: [*]
(d) Drugstore shall deposit the sum of $50,000.00 with Walsh as security
for payment of amounts owed to Walsh by Drugstore for purchases of
Walsh inventory. If any invoice remains unpaid on the 18 day after the
date of the invoice, Walsh may deduct from the deposit the amount
necessary to pay said invoice. The deposit amount shall be replenished
by Drugstore within 2 days of receipt by Drugstore of notice from
Walsh. If at any time, and each time, that monies owed by Drugstore to
Walsh for purchases of Walsh inventory exceed the deposit amount by
10% of the deposit amount, Drugstore shall increase the deposit to a
sum equal to 100% of the monies owed to Walsh; provided, the security
deposit shall not be less than $50,000.00 during the period of time
for which a deposit is required.
(e) If Drugstore remains current in its payment of invoices owed to Walsh
for Walsh inventory without any material invoices becoming past due
during the first 6 months commencing with the date of the first
purchase by Drugstore from Walsh,
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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SUPPLY AGREEMENT
PAGE 2
<PAGE>
the requirement for a deposit shall be terminated and the deposit
amount shall be applied by Walsh to the next occurring invoices until
the deposit has been exhausted. However, should any invoice not be
paid when due (thus, requiring payment made from the security
deposit), during the first 6 months, the requirement for the security
deposit shall continue until such time as 6 months have expired
without any past due invoices.
(f) Upon termination of this agreement, either at the expiration of the
term or the expiration of any extended or carry over term or for any
other reason, after payment of all sums owed by Drugstore to Walsh
under the terms of this Agreement, including but not limited to
invoices for purchases of Walsh inventory and handling charges, the
security deposit, or such portion thereof remaining, if any, shall be
paid by Walsh to Drugstore. Upon termination of this Agreement, either
at its original term or any extended or carry over term or for any
other reason, the security deposit may be applied by Walsh upon any
and all amounts owed by Drugstore to Walsh under the terms of this
Agreement.
(g) Drugstore is not required to send any orders to Walsh for Walsh
Inventory or Drugstore Inventory, or purchase any Walsh Inventory
beyond the requirements set forth in Section 6(c).
3. Drugstore Inventory.
Drugstore shall order and have shipped to the premises of Walsh at 5101A
Stateline Avenue, Texarkana, Texas, the Drugstore Inventory in accordance with
the following terms:
(a) For so long as Drugstore uses Walsh services to fulfill orders of
Drugstore inventory, Drugstore may use the inventory purchase and
management system that is currently used by Walsh. In the event
Drugstore elects not to use the Walsh inventory purchase and
management system, Walsh shall create the interface to accept the
completed purchase order data from Drugstore's system to Walsh's
system.
(b) In the event Drugstore elects to use Walsh's inventory and management
system, Drugstore shall coordinate the purchase of all Drugstore
inventory through Walsh; however, all such purchasing shall be in the
name of Drugstore, billed to Drugstore and paid by Drugstore directly
to the manufacturers and/or distributors. At no time shall Walsh be
responsible for the mis-ordering, mis-shipment or other errors
relating to the ordering and receipt of Drugstore Inventory. Drugstore
shall have Drugstore Inventory shipped to the premises of Walsh at
5101A Stateline Avenue, Texarkana, Texas 75501.
(c) In the event Drugstore elects to use Walsh's inventory purchase and
management system and Walsh incurs any fees or other charges for
allowing such use by Drugstore, Drugstore will reimburse Walsh for any
and all such charges or fees
- -------------------
SUPPLY AGREEEMENT
PAGE 3
<PAGE>
within 15 days of the date of the invoice from Walsh to Drugstore for
said charges or fees.
(d) In the event Drugstore elects to use Walsh's inventory purchase and
management system, Drugstore shall be responsible for, and bear the
expense of, maintaining the integrity of the Drugstore Inventory
files.
4. Product Orders.
Orders by customers of Drugstore shall be forwarded by Drugstore to Walsh.
Upon Walsh's receipt of confirmation of the purchase from Drugstore, the order
shall be handled in the following procedure:
(a) Walsh shall pick those items of Walsh Inventory from its product
inventory;
(b) Walsh shall pick those items of Drugstore Inventory from the Drugstore
Inventory stored on the Walsh premises;
(c) Walsh shall validate order accuracy (using hardware and software
supplied by Drugstore and in accordance with reasonable Drugstore
approved procedures), pack the ordered items in boxes and/or other
packaging materials provided by Drugstore, seal and label the package
for shipment;
(d) Walsh shall deliver the package to the Drugstore employees at the
Delivery Point;
(e) Drugstore shall accept the goods at the Delivery Point at which time
title to the Walsh Inventory in the package passes to Drugstore, and
the wholesale sale of the Walsh Inventory items is completed.
5. Shipping of Products.
(a) All materials required for shipment of products, including but not
limited to all boxes, packages, packing materials, tape, and labels
shall be provided by Drugstore at its own expense.
(b) Drugstore shall be fully responsible for all packaged products once
they have been delivered to Drugstore or its agents at the Delivery
Point by Walsh. Drugstore shall provide and make arrangement for
shipping of packaged products and shall pay all shipping charges from
the Delivery Point except as hereinafter provided.
6. Handling Fees and Bonus Payments.
Drugstore shall pay to Walsh handling fees and bonus payments for the
handling, picking and packaging for shipment of both Walsh Inventory and
Drugstore Inventory in accordance with the following terms:
- -------------------
SUPPLY AGREEMENT
PAGE 4
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(a) Drugstore shall pay to Walsh a basic handling charge of [*] per order
of goods which shall include up to [*] Lines of product regardless of
the quantity of items of any one particular line of product. In
addition, for each Line of product in excess of [*] for each order,
Drugstore shall pay to Walsh an additional [*] per Line. In
determining the number of Lines of product in an individual order,
both Walsh Inventory and Drugstore Inventory shall be included. The
picking and packing of samples, leaflets and other marketing materials
shall not be considered a Line. However, if the picking and packing of
such items materially increases the cost of fulfillment to Walsh,
Walsh shall notify Drugstore. The parties will, within five days of
such notice, discuss methods to reduce or eliminate the additional
cost to Walsh, including reducing the picking and packing requirements
for such materials or paying Walsh its cost for picking and packing
such materials. In the event the parties fail to reach an agreement,
to reduce or eliminate the additional costs to Walsh within ten days
from the date of Walsh's notice to Drugstore, Walsh may discontinue
the picking and packing of samples, leaflets and other marketing
materials until such time the parties may so agree; and any such
failure by Walsh to pick and pack any such samples, leaflets or other
marketing materials shall not be considered a terminable event by
either party under the terms of this Agreement.
(b) Walsh shall invoice Drugstore for handling charges daily. Invoices are
due on the fifteenth (15th) day after the date of the invoice (net 15
days) and must be paid by electronic funds transfer to the account
specified in paragraph 2(c) above.
(c) Drugstore hereby guarantees a minimum of [*] customer orders for
product to be handled by Walsh during the three-year term of this
Agreement. If Drugstore (1) ceases business for any reason and/or this
Agreement is terminated for any reason other than default or breach by
Walsh, or (2) does not send [*] orders to Walsh during the
initial three-year term, Drugstore shall pay to Walsh a sum calculated
as follows:
i. where the actual number of orders processed by Walsh is less than
[*] orders, Drugstore shall pay that sum of money which is equal
to the number of actual orders processed subtracted from [*]
multiplied by [*] PLUS the difference between the number of
actual orders processed and [*] multiplied by [*]. For example,
if the number of actual orders processed is equal to [*] orders,
then Drugstore would pay to Walsh the sum of [*] which is the
result of the following calculation: [*]
ii. where the actual number of orders processed by Walsh is equal to
or greater then [*] orders, Drugstore shall pay that sum of money
which is equal to the number of actual orders processed
subtracted from [*] orders multiplied by [*]. For example, if the
number of
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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SUPPLY AGREEMENT
PAGE 5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
actual orders processed is equal to [*] orders, then Drugstore
would pay to Walsh the sum of [*] which is the result of the
following calculation: [*].
Said sums shall be due and payable within 15 days after (1) cessation
of business by Drugstore (2) termination of this Agreement for any
reason other than default or breach by Walsh, or (3) the end of the
initial three year term, whichever first occurs.
(d) [*]
(e) In the event either Drugstore or Drugstore's customer request
additional special handling of an order such as gift wrap, extra
packaging or extra wrapping, Walsh may impose a special handling
charge upon each such order as the parties may so agree. All
specialized wrapping, packaging and shipping supplies shall be
furnished by Drugstore at Drugstore's cost.
(f) In the event that Walsh fails to pick the required inventory, package
it for shipment and deliver it to the Delivery Point at or before [*]
Central Standard Time (or Central Daylight Savings Time when Daylight
Savings Time is being observed) on the date of receipt of the order,
Walsh shall reimburse Drugstore for the shipping charges paid by
Drugstore upon that Order. This penalty shall not apply to any order
which cannot be filled due to circumstances beyond the control of
Walsh, including but not limited to acts of God, strikes at facilities
other than Walsh facilities, transportation interruptions affecting
the supply of Walsh Inventory, manufacturer or distributor back orders
and insufficient Drugstore inventory or packaging supplies.
(g) Drugstore shall pay to Walsh bonus compensation in accordance with the
following terms:
(i) at the end of each calendar quarter during the term of this
Agreement, commencing on March 31, 1999, a review of the goods
and services provided by Walsh in accordance with the terms of
this Agreement shall be made. Walsh shall be entitled to bonus
compensation of [*] per processed order for each calendar
quarter, if, and only if, the following bonus criteria are met:
(A) Orders received before [*] each day are delivered to the
Delivery Point not later than [*] of the same day at a rate
equal to or greater than [*] of the time.
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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SUPPLY AGREEMENT
PAGE 6
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(B) Walsh has maintained Walsh Inventory available to fill
customer orders in stock and available for picking at least
[*] of the time; provided, however, adjustments shall be
made to account for manufacturer and distributor backorders
of product, unavailable product, recall product, or any
other circumstances outside of Walsh's control which affect
the timely receipt of product by Walsh.
(C) Walsh's accuracy in filling and packaging for shipment in
accordance with Drugstore customer orders is at or exceeds
[*].
(D) Orders which are not filled and packaged ready for shipping
due to events beyond the control of Walsh including but not
limited to acts of God, strikes at facilities other than the
Walsh facilities, transportation interruptions affecting the
supply of Walsh inventory, unavailability of Walsh or
Drugstore Inventory from the manufacturer or distributor,
and unavailability of adequate and proper packaging and
shipping materials to be supplied by Drugstore, shall not be
considered in determining whether or not Walsh has met the
bonus criteria specified in (A) through (C) above.
(ii) Bonus compensation as provided in this paragraph shall be paid
within 15 days of the invoice date by electronic funds transfer
to the address and account provided in paragraph 2 (c) above.
(iii) Customer Returns of Goods shall be directed to the attention of
Walsh at 5005 North Stateline Avenue, Texarkana, Texas. Receipt
of all returned goods shall be by Walsh personnel. Returned goods
shall be handled as follows:
(A) Determination of Saleable and Unsaleable Product.
Walsh shall determine whether a returned item is Saleable or
Unsaleable at its sole and final discretion. For those items
determined by Walsh to be Saleable, Walsh shall restock the
product at its cost and shall credit to Drugstore the full
amount of the product's cost paid by Drugstore. For those
items determined by Walsh to be Unsaleable, Walsh shall
destroy, or make other arrangements for the disposal of,
such product at Walsh's cost.
(B) Handling Fees.
For each and every returned order, including the return of
partial orders, Walsh shall be paid a processing fee of
[*] per order. Walsh shall invoice Drugstore for
processing fees daily. Invoices
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
- -------------------
SUPPLY AGREEMENT
PAGE 7
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
are due on the fifteenth (15th) day after the date of the
invoice (net 15 days) and must be paid by electronic funds
transfer to the account specified in paragraph 2(c) above.
7. Reimbursement of Walsh Cost.
Drugstore shall reimburse Walsh for certain startup and ongoing costs
of operations in fulfillment of its obligations under this contract in
accordance with the following terms:
(a) Drugstore shall reimburse Walsh as the start up expenses are
incurred as follows:
(i) The sum of [*] for upgrade and modifications to Walsh's
AS400 Computer System to the standards necessary to perform
under this Agreement;
(ii) A sum not to exceed [*] for the expense of computer
programming and support (including but not limited to the
costs of payroll, benefits, travel, lodging, meals, etc.) to
implement the necessary software changes to Walsh's computer
system in order to perform its obligations under this
Agreement; and
(iii) A sum not to exceed [*] for expenses of Walsh in initially
stocking Drugstore inventory, programming for exchange of
order and receiving information between Walsh and Drugstore,
and computer programming and training for inventory
tracking.
(iv) Drugstore shall reimburse Walsh for the actual out-of-pocket
costs related to any additional programming not described in
(i) - (iii) above such as the interface programming with
Drugstore's new "scan data" hardware/software system.
(v) Sums to be reimbursed under this paragraph (a) shall be
invoiced by Walsh to Drugstore as incurred, and shall be
paid by Drugstore within [*] days by electronic funds
transfer to the address and account provided for in
paragraph 2(c) above.
(b) Drugstore shall additionally reimburse Walsh on an ongoing basis
during the term of this Agreement and any extension thereof for
the actual out-of-pocket cost of Walsh for a full time AS400
Computer Programmer including salary not to exceed [*] per
calendar year plus all health and fringe benefits customarily
provided by Walsh plus the employer's share of all payroll, FICA
and unemployment compensation taxes relating to the salaried
position. This obligation for reimbursement shall cover all
reasonable expenses incurred by Walsh commencing with its hiring
of the individual on December 14, 1998. Drugstore shall be
obligated to reimburse Walsh for its actual cost of employment of
up to two data entry clerks (to perform item file maintenance,
interface and
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
data input related to receipt of product) at a base salary not to
exceed [*] per year plus health and fringe benefits, payroll taxes,
FICA and unemployment taxes.
(c) Drugstore shall reimburse Walsh for all costs incurred by Walsh to
service and maintain any and all network servers, computer hardware,
and other peripheral equipment provided by Drugstore and installed
(with the prior written consent of Walsh) upon the premises of Walsh.
In the event any of the work which is to be performed by Walsh
pursuant to this section is anticipated to exceed [*], Walsh shall i)
provide to Drugstore an estimate of the costs which will be incurred
by Walsh in performing such work; and ii) obtain written approval from
Drugstore prior to beginning such work.
(d) Walsh shall bill Drugstore for its reimbursable costs, set forth in
this paragraph 8 (b) and (c), on the 15th and last day of each month
during the term. Drugstore shall pay said invoices within [*] days by
electronic funds transfer to the address and account provided for in
paragraph 2(c) above.
8. Contract Term.
This Agreement shall be for a period of three years from the date hereof
and shall terminate at such time unless extended in writing by the parties.
This Agreement may not be terminated for any reason other than for default
by one of the parties in performing its obligations under this Agreement. In the
event of default, the Agreement shall terminate only after the defaulting party
has received notice of the default from the non defaulting party and has failed
to cure the default within 30 days after the date of said notice; provided,
however, default in payment of any material amounts owed under this Agreement
shall not be entitled to either notice or an opportunity to cure.
Upon termination of this Agreement by Drugstore for default by Walsh, all
of Drugstore's obligations terminate, including the minimum order guarantees set
forth in Section 6(c); provided, that Drugstore shall pay any proper invoices
outstanding as of the date of termination.
9. Examination of Records.
Upon not less than 48 hours notice, each party shall be entitled to examine
the records of the other party regarding the performance of the parties under
this Agreement on regular business days (Monday through Friday) and during
regular business hours (8:00 A.M. - 5:00 P.M. central standard time).
10. Use of Facilities.
In performing the terms of this Agreement, Walsh shall provide warehouse
space for Drugstore Inventory in accordance with the following terms:
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(a) Walsh shall provide at no cost to Drugstore up to but not more than
20,000 square feet of office and storage space for Drugstore Inventory
at Walsh premises located at 5101A Stateline Avenue, Texarkana, Texas.
(b) All premises and facilities provided by Walsh shall comply with all
applicable laws and regulations, including the requirements of the
Prescription Drug Marketing Act, OSHA and regulations adopted pursuant
thereto.
(c) Drugstore shall assign an adequate number of its employees or agents
to take delivery of the packaged product at the delivery point and to
handle all matters relating to the shipment of the product packages
after receipt by Drugstore of said product packages at the Delivery
Point.
11. [*]
12. Notices.
Notice by either party will be made only in writing by certified mail,
return receipt requested or facsimile addressed to the other party and will be
considered given as of the time it is deposited with the United States Postal
Service or acknowledged as received by the other parties facsimile machine.
Addresses for notices are as follows:
Walsh Distribution, Inc.
Attn: Bob Bancroft
P.O. Box 1928
Texarkana, Texas 75504
Facsimile: 903-735-4047
DRUGSTORE.COM
Attn:
-------------------------
------------------------------
------------------------------
Facsimile:
--------------------
Changes to the notice addresses may be accomplished by notice in accordance
with this paragraph.
[*] Represents a confidential provision for which confidential treatment has
been requested from the Securities and Exchange Commission.
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SUPPLY AGREEMENT
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<PAGE>
13. Risk of Loss and Insurance.
With regard to risk of loss and insurance requirements the parties agree as
follows:
(a) The risk of loss of Drugstore Inventory shall at all times be born by
Drugstore.
(b) The risk of loss of Walsh inventory shall be born by Walsh up to and
until said inventory is delivered to Drugstore at the Delivery Point.
At the time of delivery of the packaged product to the Delivery Point,
title to Walsh Inventory shall pass to Drugstore and Drugstore shall
bear the risk of loss as owner of the packaged products.
(c) Each party shall be responsible for maintaining insurance upon its own
inventory, equipment, furniture, fixtures, supplies and other property
located upon the premises of Walsh. Each party shall provide worker's
compensation insurance upon its own employees in accordance with Texas
law.
(d) Each party shall carry General Liability Insurance in the amount of
not less than $1,000,000 per occurrence/$2,000,000 aggregate during
the term of this agreement.
(e) Each party shall furnish evidence to the other party of its compliance
with this paragraph
14. Confidential Information.
The parties hereto consider this Agreement and all of its terms and
conditions to be confidential. Except as may have been, or shall be, authorized
in writing, or as hereinafter mentioned, each of the parties hereto shall keep
confidential and shall not use otherwise than in the performance of this
Agreement and shall take all reasonable steps to insure that its employees keep
confidential and not use, all information supplied to them or which they have
learned during the negotiations leading to this Agreement or learned hereafter
concerning the business of the other. This obligation shall survive the
termination of this Agreement and for 5 years after any termination of this
Agreement. Nothing herein shall preclude disclosure of information to the extent
that the disclosure is required to be made under statutory laws or regulations
in force and applicable to the party, or pursuant to a subpoena; provided,
however, the party required to disclose any such confidential information shall
immediately, upon receipt of a subpoena, notice, demand or order to produce the
information, and prior to complying with the subpoena, notice, demand, or order,
notify the other party of said subpoena, notice, demand or order and at the
request of the other party, contest or join with the other party in contesting
the propriety and/or authority of disclosing the information. Each party shall
bear its own costs of complying with the provisions of this paragraph.
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<PAGE>
15. Independent Contract; Taxes; Indemnification.
The parties each agree and acknowledge that this Agreement does not
constitute a joint venture or partnership. This Agreement has been reached at
arms length negotiations and is an independent supply and services contract in
which Walsh acts as a wholesale distributor of the Walsh Inventory. The parties
agree and acknowledge that all sales made by Walsh to Drugstore are made at
wholesale and that Walsh is not, and shall not be, responsible for collection or
payment of any sales taxes to the State of Texas, any other state, or any other
governmental entity. Drugstore agrees and acknowledges that it is the retailer
of the products sold to its customers through the internet based on line
shopping service known as "DRUGSTORE.COM." Drugstore hereby agrees to indemnify
and hold harmless Walsh from any and all claims, actions, suits, enforcement
actions or other proceedings, including the reasonable attorney's fees,
investigation costs and other costs incurred by Walsh in defending any such
types of proceedings relating to the imposition of sales taxes upon the
transactions described in this Agreement.
16. Assignability.
This Agreement and the rights and obligations hereunder may not be assigned
by either party without the prior written consent of the other party.
17. Force Majeure.
Except for the payment of money due hereunder, Walsh and Drugstore shall be
excused for failure to perform under this Agreement where such failure results
from circumstances beyond the affected party's control including, without
limitation, such circumstances as fire, storm, flood, earthquake, strikes, work
stoppages or slow downs, delay or failure of transportation or supplies, acts of
the public enemy, acts of God or acts, regulations, priorities or actions of the
United States, a state or any local government or agents or instrumentalities
thereof.
18. Warranties.
Drugstore acknowledges that Walsh is a wholesaler of products manufactured
and packaged by other entities. WALSH MAKES NO REPRESENTATION OR WARRANTY OF ANY
KIND, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING WITHOUT LIMITATION THE
WARRANTY OF MERCHANTABILITY OR THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
OF ANY GOODS OR SERVICES SOLD OR SUPPLIED UNDER THIS AGREEMENT INDEPENDENT OF,
OR BEYOND THE WARRANTY AND RETURN POLICIES PROVIDED BY THE MANUFACTURER OR
VENDOR, IF ANY.
19. Year 2000 Readiness Disclosure.
The parties to this agreement recognize the potential for information
system problems associated with the new millennium. To avoid the possible issues
that could result from incorrectly processing date-related information, Walsh
and Drugstore shall institute a Year 2000
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<PAGE>
Compliance Plan for their respective companies to ensure that the operations of
both parties, including data exchange with suppliers and customers, can continue
without interruption up through and beyond January 1, 2000. The Year 2000
Compliance Plan shall outline a comprehensive approach for addressing all at-
risk components of Walsh operations- hardware, networks, in-house software
applications, third-party vendor applications, interfacing software, data
exchange with trading partners, automation systems and equipment. Walsh and
Drugstore represent that the defined objectives for Year 2000 Compliance are
that the processes, systems and equipment of each company shall be able to
function properly up through and beyond January 1, 2000. This includes the
ability to:
. Process (i.e. receive, perform calculations and comparisons) any
and all date-related information up through and beyond January 1,
2000.
. Accommodate dates with either a 2-digit or 4-digit year.
. Correctly process information with a date of 9/9/99.
. Correctly process information with a year date of "99" or "00"
. Correctly process information with a date of February 29 during
leap years.
20. Governing Law.
This Agreement shall be interpreted, and the rights, obligations and
liabilities of the parties determined in accordance with the laws of the State
of Texas (without regard to the conflicts of laws provisions thereof). The
parties agree that any litigation arising out of this Agreement or performance
of it by either party shall be litigated in either the District Court of Bowie
County, Texas, or the United States District Court for the Eastern District of
Texas, Texarkana, Division.
21. Amendments.
No alteration, modification or change of this Agreement shall be valid
except by an agreement in writing executed by both parties hereto.
22. Dispute Resolution.
Walsh and Drugstore will attempt to settle any claim or controversy arising
out of this Agreement through consultation and negotiation in good faith and a
spirit of mutual cooperation. If those attempts fail, then the dispute will be
mediated by a mutually acceptable mediator to be chosen by Walsh and Drugstore
within 45 days after written notice by either to the other demanding mediation.
Neither party may unreasonably withhold consent to the selection of a mediator,
and Walsh and Drugstore will share the cost of the mediation equally. By mutual
agreement, Walsh and Drugstore may postpone mediation until some specified but
limited discovery about the dispute has been completed. The parties may also
agree to replace mediation with some other form of alternative dispute
resolution. Any dispute which cannot be resolved between the parties through
negotiation, mediation or other form of agreed alternative dispute resolution
within 120 days of the date of the initial demand for it by one of the parties
may then be submitted to the courts for resolution. Nothing in this section will
prevent either party from
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<PAGE>
resorting to judicial proceedings if (A) good faith efforts to resolve the
dispute under these procedures have been unsuccessful, (B) interim relief from a
court is necessary to prevent serious and irreparable injury to one party or to
others, or (C) litigation is required to be filed prior to the running of the
applicable statute of limitations. The use of any alternative dispute resolution
procedure will not be construed under the doctrines of laches, waiver or
estoppel to affect adversely the rights of either party.
23. Limitation of Liability.
Neither party shall be liable to the other for any incidental, indirect,
special or consequential damages whatsoever arising out of, caused by, or
related in any way to this agreement. The parties expressly agree that the
limitations on incidental, consequential, special or indirect damages set forth
herein are agreed allocations of risk constituting in part the consideration for
this Agreement, and that such limitations shall survive the determination of any
court of competent jurisdiction that any remedy provided herein or available at
law fails of its essential purpose.
24. Severability.
In the event that any provision or any portion of any provision of this
agreement is held illegal, unenforceable, or invalid by any Court, such
provision or portion thereof shall be deemed to be deleted from this agreement
and the validity of the remainder of this agreement shall remain unaffected
thereby.
25. Entire Agreement.
This Agreement together with the exhibits referred to herein, constitutes
the entire Agreement and understanding of the parties with regard to the matters
covered and herein have merged all prior and collateral representations,
promises or conditions, whether oral or written.
In witness whereof, each of the parties hereto have caused this Agreement
to be signed by its respective duly authorized representative.
WALSH DISTRIBUTION, INC.
By: /s/ Ronald G. Nelson
-----------------------------
Ronald G. Nelson, President
DRUGSTORE.COM, INC.
By: /s/ Tracy R. Nolan
------------------------------
Tracy Nolan,
Vice President of Operations
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PAGE 14
